The European Union is inching closer to a historic decision on using profits from Russian assets frozen by the bloc to help Ukraine. The Russian central bank's assets were frozen shortly after the full-scale invasion of Ukraine in February 2022 and have remained so ever since. The securities and cash frozen in the G7, the EU, and Australia are estimated to be worth roughly 260 billion euros ($282 billion). Assets worth an estimated 210 billion euros are in the EU, mostly in Belgium, the home of Euroclear, a user-owned financial services company specializing in securities transactions.
In February, the first step by Brussels was completed by setting aside the profits accumulated from the frozen assets. On March 20, the European Commission proposed the initiation of the second and final step -- sending the actual cash to Ukraine. This comes after EU foreign ministers, two days before, tasked EU foreign policy chief Josep Borrell with coming up with a proposal for making this happen.
None of the 27 member states have objected so far, although it's far from a done deal. Leaders and officials from EU member states still have to study the European Commission's proposal and give it a unanimous green light. Diplomats and officials are expected to start studying the fine print of the text today.
Deep Background: The proposal, seen by RFE/RL, notes that the first step of the process, the setting aside of profits, started on February 15 this year: "the central securities depositories (CSDs) are prohibited from disposing of these profits, or distributing them to shareholders, until the [European] Council decides on the financial contribution to be raised on them to support Ukraine."
CSDs are institutions, such as Euroclear, that hold and administer securities and enable their transactions. The step is thought to have raised something between 2.5 billion and 3 billion euros. The European Commission hopes that this money can be sent to Ukraine by July, provided that member states approve. There are also hopes in Brussels that comparable sums can be sent to Kyiv each year after that, depending on annual interest rates.
There are a number of "assurances" in Borrell's proposal for member states worried that this move could amount to a seizure of private property -- with private ownership being a fundamental EU right -- or could damage the bloc's common currency, the euro. The document notes that "the generation of unexpected and extraordinary revenues...are not the property of the Russian central bank as there is no legal or contractual provision for interest to be paid to the owners of the principal.
Since these revenues only exist as a result of the restrictive measures, there can also be no legitimate expectation that they should remain with the central securities depositories and their shareholders." The proposal also added that any retroactive claims by Moscow won't be accepted: "Unexpected and extraordinary revenues do not have to be made available to the central bank of Russia under applicable rules, even after the discontinuation of the transaction prohibition. Thus, they do not constitute sovereign assets. Therefore, the rules protecting sovereign assets are not applicable to these revenues."
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Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert