European Commission presents plan to help Ukraine using Russian assets

The European Commission unveiled a proposal on Wednesday to use proceeds from Russian assets for Ukraine's defence and reconstruction. The Commission expects to be able to give Ukraine up to 3 billion euros this year.

Following Russia's invasion of Ukraine, the international community decided to ban all transactions related to the management of reserves and assets by the Central Bank of Russia. As a result, some 260 billion euros of Russian assets have been blocked internationally, including 210 billion in the EU, all held by the Brussels-based financial services company Euroclear.

Two-step plan

The EU is working on a two-step plan to help Ukraine with these assets. The assets themselves cannot be touched. What can be considered, however, is the use of windfall profits from the risk-free reinvestment of interest and dividends that have been released. The Commission says that, depending on market interest rates, between 2.5 billion and 3 billion euros could go to Ukraine this year alone.

The first step was taken last month, when the EU ruled that all securities houses managing more than 1 million euros in Russian Central Bank assets must keep the proceeds separate. They will not be allowed to claim net profits on those proceeds. Because of the built-in threshold, this principle only applies to Euroclear.

On Wednesday, the Commission proposed step 2: to use 97 per cent of these net profits to help Ukraine. Euroclear will be allowed to keep the remaining 3 per cent as an "incentive" to manage the whole system.

Internal division

The exact destination of the money will depend on needs on the ground. This year, 90 per cent should be used to fund arms deliveries and 10 per cent for rehabilitation and reconstruction, the Commission said. The exact distribution will be reviewed every year.

The proposal will be discussed by European leaders in Brussels on Thursday. Some member states, such as militarily neutral countries and Hungary, have problems with the profits going to arms supplies, while for others, such as Belgium, it is an obvious choice given the urgent needs of the Ukrainian armed forces.

^{© PHOTO KENZO TRIBOUILLARD / AFP}