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EU agrees “in principle” to spend interest from frozen Russian assets on military aid to Ukraine

EU ambassadors have agreed “in principle” on the idea of using “extraordinary” revenues from frozen Russian assets not only for Ukraine's future reconstruction, but also to help meet its current military needs, according to a statement by the Belgian Presidency of the Council of the EU.

“EU ambassadors agreed in principle on measures concerning extraordinary revenues stemming from Russia’s immobilised assets. The money will serve to support Ukraine’s recovery and military defence in the context of the Russian aggression,” read a tweet from the Belgian Presidency on May 8.

“I welcome today's political agreement,” European Commission President Ursula von der Leyen commented. “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.”

Approximately $300 billion in Russian state assets are frozen abroad. Of this sum, more than €200 billion is being held by the Euroclear European depository. Interest on these accounts has totaled €1.6 billion since the beginning of 2024 alone, and by 2027, total revenues could reach the €15-20 billion range. The potential EU plan would put this money to work in the service of Ukraine.

The U.S., unlike the EU, is open to redistributing the frozen assets themselves — not just the interest generated by the blocked deposits. In April, the House of Representatives passed a bill allowing for around $6 billion of the $300 billion in Russian frozen reserves to be sent to Ukraine.

Such a decision is not supported in Europe, where it is feared that the seizure of Russian sovereign assets frozen on the Euroclear platform could open a “Pandora's box,” one that Euroclear Executive Director Valerie Urbain warned might negatively affect Western financial markets.

In a similar spirit, on May 7, the International Monetary Fund’s First Deputy Managing Director, Gita Gopinath, stressed the importance of “legal underpinnings” when deciding on what to do with Russian state assets:

“Many countries are following closely the ongoing discussion about potential use of Russian state assets, including reserves of the Bank of Russia, to support Ukraine. While this is for relevant courts and jurisdictions to determine, for the IMF, it is important that any action has sufficient legal underpinnings and does not undermine the functioning of the international monetary system.”

Russian authorities have called any attempt to use the country's sovereign capital — or interest from it — “theft.” Still, Dmitry Medvedev, the only living former Russian President and the current Deputy Chairman of the country’s Security Council, acknowledged that Russia would not be able to “give a fully symmetrical response to this impertinence from the [United] States,” as Moscow holds “no significant amount of U.S. state property, including money, rights, and other U.S. assets.”

Nevertheless, the EU and U.S. fear that their citizens may lose the tens of billions of dollars they still have invested in Russia if Western capitals follow through with the seizure of the Kremlin’s funds in Europe, as per a recent Reuters report.

Medvedev, for his part, proposed to “recover” these assets in the interest of the Russian state and Russian private companies.

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