Russian money will help arm Ukraine. The representatives of the 27 EU member states reached a political agreement this Wednesday to send to Ukraine the extraordinary returns generated by the tens of millions of euros in Russian assets frozen by European sanctions against the Kremlin. Profits that are estimated at around 3,000 million euros annually and that can rise to 5,000, depending on the market. 90% of these funds will be channeled to militarily equip the country invaded by Russia more than two years ago; the rest, for reconstruction.
Ukraine, which is in a difficult situation on the battle fronts due to a predicted tightening of the Russian offensive at the end of spring, may receive the first package of funds, of about 1 billion euros, in July. Hungary, considered one of the submarines of the Kremlin in the EU, and which often tries to slow down or boycott plans to help kyiv, has abstained from voting on the measure. Russia has threatened retaliation if the profits its assets are producing end up in the hands of Ukraine.
The green light from community representatives to the Foreign Action Service proposal comes in the midst of debate in the G-7 on frozen Russian assets at a global level. The United States, Canada and the United Kingdom advocate, as does Ukraine, for directly confiscating these assets instead of using only the returns they generate. Something that Japan, France, Germany, Italy and the EU reject. It is fundamentally in Europe – mostly in Belgium and later in Luxembourg – where these Russian assets are located.
Structuring a system to use the benefits that the assets are producing has been very complicated legally and politically. Total confiscation would represent a qualitative and quantitative leap, with immense economic (for the euro), legal, political and diplomatic effects, community sources warn. But kyiv’s allied countries are finding it increasingly difficult to scrape from their budgets to send economic and military aid to Ukraine, so the debate over Kremlin-linked assets will continue.
Immediately after the full-scale invasion of Ukraine launched by the Kremlin, the EU froze the assets that the Central Bank of Russia had in Europe: around 210 billion euros, which over time are generating unexpected profits. In February, the EU began freezing profits from deposits of more than one million euros linked to that institution.
With the new EU regulation, which will receive the final auction from the foreign ministers of the member states, 90% of these profits will be used to arm Kiev, while 10% will be for reconstruction. In addition, a small percentage (0.3%) will be left for management expenses for Euroclear, a clearing and settlement entity that has Russian assets worth about 190 billion euros in custody in Belgium and which may also retain another 10 % to cover possible lawsuits, and if it were not used it would also go to Ukraine, according to the proposal advanced by Morning Express.
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Carrying out the measure has been difficult. In fact, in recent weeks it had run aground in Belgium, headquarters of Euroclear, where there is a 25% corporate tax rate on these assets. The Belgian Government has faced harsh criticism for doing “double accounting”: although Belgium claims to have allocated the profits to bilateral aid to Ukraine, member states such as Germany, Italy and France demanded guarantees that what was obtained would go entirely to Kiev through the common stock exchange. Belgium has agreed to transfer those revenues to an international fund for kyiv.
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