EU closer to using Russian asset profits for Ukraine arms

Leaders of the European Union (EU) have announced a plan to use proceeds from frozen Russian assets to support Ukraine, including purchasing arms for Kyiv. This plan, presented by the European Commission, was agreed upon by the bloc’s 27 member countries during a summit in Brussels. Charles Michel, president of the European Council, expressed confidence in the ability to act quickly on this initiative.

Concerns about the ongoing war in Ukraine, where Russian forces are advancing and Ukrainian forces need additional support, have prompted the EU leaders to expedite this plan. The proposed $60 billion military aid package for Ukraine from the U.S. Congress is currently stalled.

European Commission President Ursula von der Leyen stated that the first 1 billion euros ($1.09 billion) from the frozen Russian assets could be distributed as early as July 1. The Commission’s proposal involves transferring 90% of profits from these assets to an EU-managed fund for purchasing arms for Ukraine.

The remaining 10% of the profits would be allocated for budget aid for Kyiv. Estimates suggest that the profits from the frozen Russian assets, which include central bank securities and cash, could range between 2.5 billion euros ($2.73 billion) and 3 billion euros annually.

While Moscow views this initiative as theft, the idea of using these funds to benefit Ukraine has garnered widespread support among EU governments. Michel and von der Leyen noted that key EU member states like Germany and France have expressed strong endorsement for the plan.

However, some countries, including neutral states like Malta, Austria, and Ireland, have reservations about using the money to purchase weapons. Austrian Chancellor Karl Nehammer emphasized the importance of ensuring that funds approved by neutral countries are not used for weapons and ammunition.

Michel acknowledged the concerns raised by these neutral countries and indicated that the EU would address them within the framework of the scheme. Ukrainian President Volodymyr Zelenskiy urged the EU to consider utilizing the frozen assets themselves, a proposal currently not on the table.

Zelenskiy emphasized the need for Russia to face the consequences of war and called for a fair peace settlement. He highlighted the challenges faced by Ukraine in terms of insufficient artillery in the conflict with Russia, which invaded the country in February 2022.

As the EU explores ways to bolster its defense capabilities, there is opposition from some Western banks due to concerns about potential legal ramifications. The leaders of the 27 EU nations also discussed enhancing Europe’s defense capabilities and supporting the arms industry amid uncertainties about U.S. commitments to European security.

French President Emmanuel Macron and others have endorsed a proposal for European defense bonds, put forth by Estonian Prime Minister Kaja Kallas. However, countries like Germany, Austria, the Netherlands, and Sweden are cautious about such initiatives.

In their summit declaration, EU leaders instructed officials to explore funding mobilization options and report back by June. They also called on the European Investment Bank to adjust its lending policies to accommodate investments in the defense industry.

Overall, the EU’s efforts to support Ukraine, enhance its defense capabilities, and address the challenges posed by the conflict with Russia reflect a commitment to ensuring the security and stability of the region.

($1 = 0.9208 euros)

(Reporting by Andrew Gray, Jan Strupczewski, Kate Abnett, Julia Payne, Gabriela Baczynska, Philip Blenkinsop, John Irish, Nette Noestlinger and Andreas Rinke; Writing by Ingrid Melander and Andrew Gray; Editing by Alison Williams, Alex Richardson, Sharon Singleton, Timothy Heritage and Daniel Wallis)