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EU countries have agreed to use profits from Russia’s frozen state assets worth an estimated three billion euros to jointly purchase weapons for Ukraine.
The deal negotiated on Wednesday by the bloc’s 27 ambassadors only targets profits from the Belgian central securities depository Euroclear, where about 190 billion euros of Russian central bank assets are held. In response to Ukraine’s full-scale invasion of Russia, Western nations decommissioned Russia’s state assets abroad in 2022.
The European Commission expects Euroclear to transfer around 3 billion euros annually to the bloc’s funds every two years, with a first disbursement expected in July. The measure applies to profits accumulated by Euroclear from mid-February 2024.
Of this, 90 percent would be used to purchase weapons and military equipment for the Kiev armed forces, while the remaining 10 percent would be used for reconstruction. This division allays concerns of the militarily neutral EU countries Austria, Malta, Cyprus and Ireland, which want a share of profits to finance non-military purposes.
The move, which has been planned for months, comes after EU members such as Germany, Italy and France rejected US-backed demands from Ukraine to confiscate around 260 billion euros in Russian state assets immobilized abroad. Berlin, Paris and Rome said such a radical move could have legal and financial repercussions.
The US has also proposed issuing about $50 billion in debt to Ukraine and repaying it with expected future profits from Russian state assets.
This plan would bring more money to Kiev, but the EU says it is too complex and lengthy, even though the priority should be getting the money to Ukraine quickly.
Euroclear has made around €5 billion in net profits from Russian assets since Moscow’s invasion of Ukraine began. Of these, the net profits achieved until mid-February of this year remain with Euroclear and serve as a buffer against legal claims.
Euroclear will also retain 0.3 percent of future profits as an incentive fee and temporarily withhold 10 percent for financial stability reasons, which would eventually be transferred to the EU.
Belgium, which charges a 25 percent corporate tax, has earned about 1.6 billion euros from Euroclear’s profits tied to Russian assets since the start of the war. Belgian Prime Minister Alexander De Croo said his country used those revenues “for expenses related to Ukraine.”
According to the Belgian government, Euroclear’s tax revenues related to Russian assets are expected to rise to 1.7 billion euros this year, of which 1 billion euros are earmarked for military aid to Kiev.
Due to pressure from the US and other EU member states to forgo these tax revenues, Belgium has said it is open to a “voluntary agreement” with EU and G7 partners for corporate tax revenues from profits from Russian assets from 2025.
De Croo said this should be done “in line with EU and G7 partners who also have such assets” and that this “could significantly strengthen and sustain our financial support to Ukraine and help it win this war.” “.