Espreso. Global

EU develops mechanism to transfer profits from frozen Russian assets to Ukraine - Bloomberg

19 March, 2024 Tuesday
11:40

The European Union has prepared proposals according to which Ukraine will start receiving profits from frozen Russian assets as early as July

Bloomberg reports this with reference to draft documents and sources.

According to the publication, the proposals include a tax on income from frozen reserves to use about €3 billion a year to finance arms supplies to Ukraine and develop its defense industry.

Bloomberg reminds that about €260 billion of the Russian Central Bank's assets, mostly in the form of securities and cash, have been frozen by the G7 countries, the EU and Australia, with more than two-thirds of them blocked in the EU.

The publication notes that funding has become especially important as Ukraine faces a shortage of artillery and about $60 billion in U.S. aid remains blocked by Congress.

The Biden administration is pushing G-7 allies to unlock frozen assets and wants to see progress before the leaders' summit in June. But some European countries, including Germany and France, as well as the European Central Bank, are reluctant to do so.

Under the EU’s proposal, a share yet to be determined of the proceeds generated since Feb. 15 would be transferred to the EU bi-annually until sanctions are lifted. The funds would be initially allocated to the European Peace Facility, as well as to the Ukraine fund in the EU budget.

A share of the profits would remain with the central securities depositories holding the reserves to cover the costs of managing the assets and deal with any risks.

The proposals will be discussed by EU leaders when they meet in Brussels later this week.

Polish Foreign Minister Radoslaw Sikorski told reporters after meeting with his EU counterparts in Brussels on Monday that they had made a "political decision, although not a legal one" to take advantage of these profits.

Josep Borrell, the EU's foreign affairs chief, told reporters: "I cannot say there was unanimity, but a strong consensus to take this decision."

However, according to people familiar with the matter, some member states are reluctant to support the use of frozen funds to provide military support to Ukraine, which risks delaying progress on this issue.

What is known about the confiscation of Russian assets

On November 30, the US Senate introduced a bill to confiscate Russian assets. On January 11, the Biden administration supported the confiscation of Russian assets for transfer to Ukraine.

Meanwhile, the European Commission has a plan to raise €15 billion from Russia's frozen assets to provide financial assistance to Ukraine.

On January 24, a U.S. Senate committee approves a bill to confiscate Russian assets and transfer them to Ukraine.

On January 30, the Political Affairs Committee of the Parliamentary Assembly of the European Council adopted a draft resolution that provides for the confiscation of frozen Russian assets and their transfer to a new fund for the restoration of Ukraine.

Europe holds €191 billion of Russia's €260 billion of frozen foreign assets, which amounted to €4.4 billion in 2023, and they want to transfer them to Ukraine.

On February 12, the EU Council decided to regulate the future mechanism for using profits from frozen Russian assets in the EU in favor of Ukraine.

British Prime Minister Rishi Sunak said that Western countries should take a bolder approach to confiscating Russian assets that they froze after Russia's full-scale invasion of Ukraine.

On March 6, British Foreign Secretary David Cameron said that London was ready to lend all the frozen Russian assets of the central bank to Ukraine on the grounds that Russia would pay reparations to Ukraine after the war.

On March 11, EU High Representative for Foreign Affairs and Security Policy Josep Borrell said that the frozen Russian assets could be used not only to rebuild Ukraine, but also to strengthen its defense capabilities by purchasing weapons.

FT sources say that Ukraine may receive the first funds from the frozen assets of the Russian Federation as early as July.






 
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