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EU leaders have endorsed plans to use billions of euros in earnings generated by frozen Russian assets to help Ukraine, with the European Commission expected to put forward legal proposals in early December.
Western sanctions have immobilised $300bn belonging to Russia’s central bank since Moscow launched its full-scale invasion of Ukraine last year. The lion’s share — €180bn according to the Belgian government — is held at Euroclear, the world’s largest securities depository, headquartered in Brussels.
“Politically, we agreed that ultimately Russia must pay for the long-term reconstruction of Ukraine,” European Commission president Ursula von der Leyen said on Friday after a summit of EU leaders.
“We are currently working on an initial proposal to focus on the so-called windfall profits,” she added. “These windfall profits are already quite substantial. The idea is that we pool them and channel them, through the EU budget . . . to Ukraine.”
The commission intends to table a plan in early December that would facilitate the transfer of proceeds of the frozen assets to Kyiv, two senior officials involved in its preparation told the Financial Times.
“These conclusions are a green light for us,” said one of these people, referring to a joint statement from the leaders “to accelerate work with a view to submitting proposals”.
Euroclear on Thursday said it earned €3bn on the frozen Russian assets in the first nine months of this year alone, compared with €347mn in the same period in 2022, an increase propelled by rising interest rates.
Coupon payments and bond redemptions due on the immobilised Russian assets have remained stuck at Euroclear, as they cannot be paid out to clients who are subject to sanctions. The securities depository routinely reinvests such cash balances, and rising interest rates have meant that Euroclear is earning more through those investments.
EU officials have been looking at ways to funnel those proceeds to Ukraine, but the European Central Bank has warned of potential risks to the euro in accessing these earnings, warning that it could induce other central banks to abandon their euro-denominated assets and weaken the currency.
Brussels is in regular contact with London and Washington to ensure their approaches are synchronised, the two senior officials added.
Several member states, such as Germany, had previously been sceptical about the plans because of legal concerns around ownership of the funds. Those concerns were assuaged earlier this month when US Treasury secretary Janet Yellen swung behind the idea of skimming off windfall profits. The G7 has also endorsed the plans.
Estonia, one of the countries strongly pushing for this measure, said it was important for Russia to pay for the damage it was doing in Ukraine. “The restoring of the damages that Russia has caused, it has to be paid by Russia . . . so we have to think outside of the box,” said Estonian premier Kaja Kallas.
The EU proposals in December are expected to clarify the legal obligations around windfall earnings at securities depositories such as Euroclear and mandate that they be set aside. Only in a later step, expected next year, will legislation be tabled to actually seize and redistribute the funds to Kyiv.
