EU states agreed that the proceeds from frozen Russian assets will be used to help Ukraine militarily

On May 8th EU states reached an agreement on the first stage of a plan to direct the revenues generated by Russian assets frozen by the EU towards the reconstruction of post-war Ukraine.

This move follows a long and protracted debate regarding the likelihood of using frozen Russian assets to benefit Ukraine’s reconstruction.  At the end of April EU countries discussed plans to deliver an aid package worth around €3bn a year to Ukraine by using the interest from Russian central bank assets held within the EU.

But EU lawmakers wanted to step things up a notch. A Polish MEP from the Socialists and Democrats Group said that “Europe needs to seize all of Russia's underlying assets and it needs to do so now.”

His Lithuanian colleague added that “every day brings new destruction to Ukraine, and that Russia needs to pay’. Kubilius said that "It's time for the EU to take firm decisions on countermeasures and confiscate all EUR 300 billion of frozen Russian assets.” Kubilius reminded that a similar mechanism was used by the United States against the state of Iran in 1991, as well as against the state of Iraq in 1992 to compensate for the damage caused to Kuwait. This proposal was supported by the majority of MEPs who took part in the discussion during the plenary session. Vlad Gheorghe, a Romanian MEP said that by seizing Russian assets the European Union can access 200 billion euros to be used in helping Ukraine.

Another Romanian MEP, Cristian Terhes, also proposed to have Ruben Vardanyan, an Armenian billionaire with close financial ties to Russia and Putin scrapped from the nominees’ list for the Nobel Peace Prize in 2024. The move is also supported by Lithuanian MPs. Journalists found that money was secretly transferred through his companies to Putin’s close friends. In 2006-2013, over $4.6 billion passed through the accounts of offshore networks of companies of “the Kremlin’s wallet”.

The freezing of Russian assets would mean that almost 19 billion euros worth of Russian oligarchs’ money would be seized in the EU, and the EU member states together with countries of the G7 would limit Russia's access to about 300 billion dollars of its foreign exchange reserves, a measure described by Moscow as a ' 'theft''.

From this amount, the EU has already frozen assets of the Russian Central Bank worth about 200 billion euros, the largest part of this amount being kept in Belgium. Belgium proposes more of a tax on these funds. The option of confiscating these assets and their direct transfer to Ukraine, desired by many Western politicians, seems at least for the time hard to pull off, as it would risk upsetting international financial markets and weakening the euro, with Moscow threatening "painful" measures if such idea will be put into practice.

In a second stage, to allow Ukraine to collect these funds, the European Commission will formulate a new proposal to regulate the confiscation and use of these revenues obtained from frozen Russian assets. The European Commission justified this approach by the need for prudence in the face of possible legal backlash.

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