EU leaders on Friday (30 June) tasked the European Commission to propose legal ways to make use of the Russian assets frozen in the bloc to finance Ukraine’s reconstruction.
In a push to find ways to help rebuild Ukraine, member state leaders called for the sanctioned Russian central bank’s immobilised assets that are in the EU to be used to finance its reconstruction.
As this has never been done before, EU experts, lawyers, and economists have been working on options and potential legal bases to find a creative way to make Russia pay for the damages it caused.
The Commission “will come forward with a proposal and we will focus prudently on the windfall profits from the immobilised assets of the Russian Central Bank,” Commission President Ursula von der Leyen said after the meeting of leaders.
The idea to use the windfall profits from the money stuck in the European Union came as diplomats, economists and lawyers worked on finding a way to use the frozen assets for the rebuilding of a Ukraine, after the EU leaders tasked them to explore ways.
€3 billion a year
“According to the current estimation, the returns [of windfall profits] could be €3 billion [per year],” Belgian Prime Minister Alexander De Croo told reporters after the meeting.
The €3 billion figure comes from the fact that around €100 billion of the Russian Central Bank’s assets are stuck in the Belgium-based Euroclear clearing house, which is under the European Central Bank’s (ECB) interest rate of 3%, one EU diplomat said.
The plan is to push for these profits to be redirected to Ukraine, instead of to the ECB, EURACTIV understands, though due to concerns on the financial stability and international balance of the eurozone, is still under much discussion from leaders.
“We have to maintain the balance between making sure Russia is forced to pay for the damages it has done, and not jeopardising the stability of the financial system, that is the balance we found,” De Croo also told reporters, including EURACTIV.
However, “it remains to be seen what the legal basis will be,” he also said, staying clear from already supporting the plan the Commission will put forward.
German Chancellor Olaf Scholz echoed De Croo: “We are not for or against it. No one can be in favour of something very concrete at the moment,” pointing out that the legislative proposal has yet to be presented by the EU executive.
Because there is no precedent to use the profits from another country’s foreign reserves, “we have to study and understand the many, many different legal and factual challenges in order to see what is possible, and we are not there yet,” he said.
“It’s all terribly complicated and nobody knows at the moment what, or if, and how,” Scholz told reporters after the summit.
No hazardous assets management
This preferred plan to use the windfall profit means the EU will leave the Central Bank’s assets untouched.
The leaders did not support the other option the Commission put forward last year, according to which it would manage the immobilised assets to hopefully generate profits, which would then be used to finance Ukraine’s reconstruction.
“We cannot touch the assets of the Central Bank, these are the assets of the Central Bank. It would destabilise the financial system,” De Croo explained.
The second option was left aside after the European Central Bank called the idea too risky and spooked the member states.
[Edited by Nathalie Weatherald]
