Europe and the United States are considering using the profits and interest income from frozen Russian assets to aid the Ukrainian military in their battle against Russian forces. There is debate over whether confiscation of these assets would be legal or wise, with objections coming from various countries and officials. While direct confiscation appears unlikely, proposals to seize and use the profits earned on these Russian assets are gaining traction as a potential way to support Ukraine without raising legal challenges.
The European plan involves using most of the interest gained on the frozen Russian assets to help arm Ukraine and finance the country’s reconstruction. E.U. nations are expected to approve the plan to transfer profits to the European Peace Facility for military aid. The European Commission anticipates transferring around €3 billion per year to the bloc’s funds biannually, with the first payout expected in July. This plan targets profits made by Belgium’s central securities depository Euroclear, where majority of the Russian assets are held.
The United States has proposed giving Ukraine an upfront payment of $60 billion and then using the profits from the Russian assets held in Europe to pay back the debt over time. The Biden administration aims to maximize the impact of these revenues for Ukraine’s benefit and demonstrate Western commitment to both Ukraine and Russia. The American plan follows the European one and could be arranged before the November election, potentially avoiding delays that can arise from political processes.
There are concerns from Brussels regarding the American plan, including the risks involved and the implications for European control over the assets. Questions about responsibility for covering shortfalls if interest rates drop, or what happens if Russia’s sanctions are lifted, have been raised. European officials suggest that the United States should be the guarantor, while the Americans propose Europeans take responsibility. Some suggest that the Group of 7 take responsibility or the European Commission issue the bond, as the assets are held in Europe.
Despite the debate over how to use the profits from frozen Russian assets for Ukraine, the idea of outright confiscation remains unlikely but continues to be discussed. Some argue that confiscation would force Russia to pay for the expensive reconstruction of Ukraine. Others point out that freezing the assets was a more decisive step than confiscation and caused no market turbulence. There are concerns about financial instability, but the West’s economic strength is seen as their greatest advantage that Russia cannot effectively retaliate against.
The Europe and the United States are hoping to reach an agreement on the use of profits from frozen Russian assets for Ukraine at the upcoming Group of 7 summit meeting in Italy. The debate continues over the legal, financial, and strategic implications of making use of these assets to support Ukraine in its ongoing conflict with Russia. Ultimately, the decision on how to best utilize these assets will have far-reaching consequences for international relations, financial stability, and the future of the Ukrainian military efforts against Russia.
