The European Commission wants to use interest income from Russian assets in Europe to finance arms and ammunition purchases for Ukraine. Legally difficult. And risky. Not just because of a possible reaction from Moscow.
Shortly before the start of the EU summit in Brussels, the Union sends a strong but also risky signal to Moscow. Now the EU does not (yet) have military power to put pressure on the Kremlin. But then an economic one.
In late 2023, Brussels discussed for the first time the use of Russian assets stored in Europe to support Ukraine. Although it was initially about reconstruction, Europe’s leading politicians are already speaking clearly: it is about buying weapons for Ukraine.
European Commission President Ursula von der Leyen told the European Parliament on February 28: “It is time for us to talk about using frozen Russian assets to jointly purchase military equipment for Ukraine. There can be no stronger statement and no better use of these assets than to use them to make Ukraine and all of Europe a safe place to live.”
Josep Borrell, who said upon taking office in 2019 that Europe must “learn the language of power,” called for 90 percent of frozen Russian funds to be used to buy weapons for Ukraine. The remaining ten percent should be transferred to the EU budget to support Ukraine’s defense industry.
And even German Chancellor Olaf Scholz, who is known to be a waver, announced last Friday during the “Weimard Triangle” meeting with French President Emmanuel Macron and Polish Prime Minister Donald Tusk that “in the future, Russian assets frozen in Europe will disappear.” are used to buy weapons.” When asked by the Krone, a government spokesperson from Berlin confirmed: “With his statement, the Chancellor referred to windfall profits in the EU from frozen Russian state assets. With its decision of 29 January 2024, the Council of the EU has laid the foundation for supporting Ukraine. For its specific use, the Commission must first submit a proposal, which must then be unanimously adopted by the Council.”
So you use Russian money to buy weapons for Ukraine, which uses them to shoot Russians?
No, says the European Commission, which will present its proposal in time for the EU summit, as the media unanimously report. The frozen Russian assets in the West amount to 260 billion euros. Two-thirds of these are located in the EU at the Belgian financial services provider Euroclear. This property remains untouched. But the interest accrued on these assets is deposited into a separate account, so the money won’t flow back to Russia if sanctions are ever lifted. This amounts to about three to four billion euros per year. EU members unanimously approved this move in February.
But how can the EU confiscate the interest? Here, a legal expert from the EU explains that this interest only arises because the money has been frozen and sanctions have been imposed. This is called ‘extraordinary income’. Therefore, it is not money that Russia is entitled to. Legally important. And is also covered by the contracts between Euroclear and the Russian central bank. The money then flows to the European Peace Facility (EPF). The EU created this budget two years ago. It runs outside the EU budget, but is financed by contributions from members. This means that the EU can purchase weapons and ammunition from third countries for Ukraine, for example, without violating EU treaties.
How that money will be used will still remain a matter of debate. Neutral states like Ireland do not want to agree to an arms purchase, but want to use the money for mine-clearing equipment. The Commission’s proposal will be discussed at the EU summit on Thursday and Friday.
However, it remains a delicate issue. In an initial response, Moscow described the commission’s plan as ‘theft’. Now there are hardly any Western assets in Russia, but the nationalization of private investments will continue, as happened at the end of 2023 with Carlsberg, Danone or the OMV share packages in a West Siberian natural gas storage facility.
It would be a step with a strong signaling effect. But a risky one. Brussels must take into account the risk of losing the confidence of other countries, such as China or countries in the Arab world, to hold their currency reserves in euros. This damages the value of the euro.
Source: Krone
I am Wallace Jones, an experienced journalist. I specialize in writing for the world section of Today Times Live. With over a decade of experience, I have developed an eye for detail when it comes to reporting on local and global stories. My passion lies in uncovering the truth through my investigative skills and creating thought-provoking content that resonates with readers worldwide.
