European Council gives go ahead to use windfall profits from frozen Russian assets to aid Ukraine

In the light of Russia’s continued war of aggression against Ukraine, the European Council has adopted a set of legal acts ensuring that the net profits stemming from unexpected and extraordinary revenues accruing to central securities depositories (CSDs) in the EU, as a result of the implementation of the EU restrictive measures, will be used for further military support to Ukraine, as well as its defence industry capacities and reconstruction.

This means that the CSDs holding Russian sovereign assets and reserves ofmore than €1 million will make a financial contribution from their corresponding net profits, accumulating since 15 February 2024. The amounts will be paid by the CSDs to the EU on a bi-annual basis, and will be used for further military support to Ukraine through the European Peace Facility, as well as with support to Ukraine’s defence industry capacities and reconstruction needs with EU programmes, according to the following percentages:

This allocation will be reviewed yearly, and for the first time before 1 January 2025. CSDs will be allowed to provisionally retain a share of around 10% of the financial contribution to comply with statutory capital and risk management requirements in view of the impact due to the war in Ukraine, with regard to the assets held by CSDs.

On 12 February 2024, the Council decided that CSDs holding more than €1 million of assets and reserves of the Central Bank of Russia (CBR) that were immobilised as consequence of EU’s restrictive measures, must set aside extraordinary cash balances accumulating due to EU restrictive measures, and may not dispose of the ensuing net profits.

Marking the second year of Russia’s illegal, unjustifiable, and unprovoked full-scale invasion of Ukraine, the G7 Leaders in their statement of 24 February 2024 reiterated their countries’ continuing support for Ukraine’s right to self-defence and their commitment to Ukraine’s long-term security, and committed to step-up their security assistance to Ukraine and increase production and delivery capabilities to assist the country. That statement welcomed the adoption of the EU legal acts concerning extraordinary revenues of CSDs gained from Russia’s immobilised sovereign assets and encouraged further steps to enable their use, consistent with applicable contractual obligations and in accordance with applicable laws.

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