EU Approves Deal to Reserve Profits from Frozen Russian Assets for Ukraine's Reconstruction

Brussels - In a significant move, European Union nations have given their approval to an outline deal that would reserve the profits generated from frozen Russian central bank assets. The assets, amounting to hundreds of billions of dollars, were frozen as part of the EU's retaliation against Moscow's war in Ukraine.

The tentative agreement, reached late on Monday, marks a crucial step towards utilizing the 200 billion euros ($216 billion) in Russian central bank assets held in the EU to aid Ukraine in its reconstruction efforts following the devastating impact of the Russian conflict. While formal approval is still pending, an EU official disclosed that the bloc intends to "start collecting the extraordinary revenues generated from the frozen assets... to support the reconstruction of Ukraine."

Given Ukraine's ongoing struggle to meet its financial obligations, both the EU and the United States have been withholding aid plans due to political considerations. These considerations involve determining whether allies will continue supporting Ukraine in the same manner as they did during the initial two years of the war.

In a bid to salvage the situation, EU leaders are set to convene on Thursday with the aim of approving a support package worth 50 billion euros ($54 billion) for Ukraine. It is important to note that Hungarian Prime Minister, Viktor Orban, has voiced opposition to this package.

While utilizing unfrozen assets appears to be a practical approach, concerns have been raised regarding the potential impact on the EU's standing in global financial markets, as some fear that financial weaponization could tarnish its reputation.

President Volodymyr Zelenskyy of Ukraine had called for a "strong" decision this year to redirect the frozen assets in Western banks towards defense against Russia's war and Ukraine's reconstruction efforts.

The EU's latest progress on Monday sets the groundwork for implementing such measures if EU nations choose to do so. Ukraine's Group of Seven allies are currently seeking an appropriate legal framework to pursue this plan.

The United States, along with its allies, had previously announced their blockade of over $600 billion in Russian funds held outside its borders, including approximately $300 billion from Russia's central bank, in response to Russia's invasion. Since then, targeted sanctions have been imposed on companies and wealthy elites with connections to Russian President Vladimir Putin.

The World Bank's most recent damage assessment, released in March 2023, has estimated that the cost of Ukraine's reconstruction and recovery will amount to $411 billion over the next decade, encompassing both public and private fund requirements.

Belgium, currently holding the rotating presidency of the European Union, is leading the discussions on whether to seize Russia's assets. Notably, Belgium is also the country where the majority of the frozen Russian assets under sanctions are being held, with tax collections already underway. Belgian Prime Minister Alexander De Croo had previously announced that 1.7 billion euros ($1.8 billion) in tax collections had been accumulated and would be allocated towards military equipment, humanitarian aid, and supporting the rebuilding of the war-torn nation.