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EU member states have reached agreement on a plan to use billions of euros in profits from frozen Russian central bank assets to arm Ukraine and fund its post-war reconstruction.
Moscow has made a string of battlefield gains in recent months, pressing its manpower and weapons advantage as Kyiv awaited critical new Western aid more than two years into the conflict.
With Washington finally set to deliver on a long-stalled aid package, Kyiv’s other major backer the European Union has also been pushing for months to find more funds.
Leaders of the 27-nation bloc agreed in March to move ahead with the assets proposal, expected to unlock some €3 billion a year, leaving diplomats to hammer out the details.
Posting on X, the bloc’s Belgian presidency said EU ambassadors had “agreed in principle on measures concerning extraordinary revenues stemming from Russia’s immobilised assets”.
It said the funds would “serve to support Ukraine’s recovery and military defence in the context of the Russian aggression,” with a first tranche expected to be freed up in July.
“There could be no stronger symbol and no greater use for that money than to make Ukraine and all of Europe a safer place to live,” added EU Commission chief Ursula von der Leyen.
Ireland, in keeping with its ongoing stance in such decisions, was set to “constructively abstain” because of its policy of military neutrality.
In the event a portion of the €3 billion will go towards non-lethal support for Ukraine, on the basis of specific requests from Kyiv, Ireland will support this aspect, according to a source.
The EU froze around €200 billion of Russian central bank assets held in the bloc as part of punishing sanctions imposed on Moscow for sending troops into its neighbour in February 2022.
Simply confiscating the money and giving it to Ukraine has so far been ruled out for fear it could rattle international markets and undermine the euro.
But EU leaders settled instead on a plan to target the interest being paid on the frozen assets – considered legally sound despite warnings of “serious consequences” by the Kremlin.
‘First step?’
Under the deal, to be submitted to EU ministers for formal approval, 90% of the interest would go to a central fund used to pay for weapons for Ukraine, the European Peace Facility, while 10% would go to the EU’s separate Ukraine Facility.
About 90% of the funds frozen in the EU are held by the international deposit organisation Euroclear, based in Belgium.
As part of the agreement, diplomats said Belgium agreed to send Ukraine the totality of the tax revenues generated by the profits since the start of the war – a sticking point in negotiations.
That is expected to free up an additional €1.7 billion for Ukraine in 2024.
Euroclear’s fee for handling the assets was also slashed tenfold, to 0.3% of profits, as part of the deal, diplomats said.
European capitals had been pressing to lower the fees levied by the clearing house – which reported net interest earnings related to Russian sanctions of €4.4 billion in 2023.
While Russia has put its economy on a war footing, the EU has fallen well short of a promise made last year to supply Ukraine with a million artillery shells by this month.
The EU has put forward a raft of proposals aimed at arming Ukraine.
Those include allowing the EU’s financing body to open up lending to more technologies that can be used by militaries – a step formally approved by the board of the European Investment Bank.
But there are complaints Europe is still not moving fast enough.
The foreign minister of Estonia – which is leading the drive to ramp up support – said the deal should be viewed as a “first step” towards using the full amount of frozen Russian assets.
“Three billion per year for Ukraine is nothing compared to 200 billion to help Ukraine win,” Margus Tsahkna posted on X.
The massive US aid package approved last month – which earmarks $61 billion for Kyiv – authorises the president to confiscate and sell Russian assets to finance Ukraine’s reconstruction, an idea gaining traction with other G7 countries.
In total an estimated $397 billion in Russian assets have been frozen by the West: three-quarters in central bank assets but also yachts, real estate and other property from oligarchs close to President Vladimir Putin.
EU ambassadors were also set to begin a discussion on the 14th round of sanctions against Russia.
The package is expected to include a ban on the import and re-export of Russian liquified natural gas, as well as helium.
Diplomats were also due to discuss proposed restrictions on European political parties and media receiving funds from Moscow following allegations that far-right MEPs were being supported by the Kremlin to promote pro-Russian talking points in the European Parliament.
Additional reporting by Tony Connelly
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