EU official makes new proposal on using frozen Russian assets in Europe

Speaking to reporters in Brussels on March 19, the European Union's (EU) foreign and security policy chief, Josep Borrell, suggested that the EU should take 90% of the revenue from Russian assets frozen in Europe and transfer them to an EU-run fund that finances weapons for Ukraine.

Reuters news agency quoted Mr. Borell on the same day as saying that he would officially submit this proposal to the 27 EU member governments on March 20, local time, ahead of the bloc's Summit on March 21 and 22.

Under Mr Borrell’s plan, 90% of the revenue from frozen Russian assets in Europe would be transferred to the European Peace Facility, an extra-budgetary EU fund that provides military aid to non-EU countries, which is currently mainly used to aid Ukraine.

According to The Guardian on March 14, about 300 billion USD belonging to the Central Bank of Russia has been frozen in the West, mostly in foreign currency, gold and government bonds.

Of these, Reuters news agency added that about 70% are stored at the Belgian Central Securities Depository (Euroclear). This amount of assets includes securities and cash of the Central Bank of Russia worth 190 billion euros (206.1 billion USD).

Mr Borrell stressed that his proposal was to use only the profits from frozen Russian assets in Europe, not the assets themselves. According to Mr Borrell, frozen Russian assets in Europe could generate around 3 billion euros in profits each year.

In addition to the proposal to use 90% of the revenue from frozen Russian assets in Europe to buy weapons for Ukraine, Mr. Borell also proposed transferring the remaining 10% of the revenue to the EU budget.

According to EU rules, the bloc's budget cannot be used for arms aid, but according to Mr. Borell, it could be used to strengthen the defense capabilities of Ukraine's industry.

Regarding frozen Russian assets in Europe, The Guardian reported on March 14 that officials at the European Commission (EC) are ready to present what they believe is a strong legal proposal for member states to consider, possibly before a meeting of prime ministers in Brussels on March 21.

According to a senior EU official, Russia’s money in Europe could generate 15-20 billion euros in after-tax profits by the end of 2027, the end of the EU’s current fiscal cycle, depending on global interest rates. This year, Russia’s money in Europe is expected to generate 2-3 billion euros in profits, depending on potential interest rate changes, which could be sent directly to Ukraine.

European officials initially discussed using the proceeds of frozen Russian assets to fund Ukraine’s reconstruction. But in recent weeks they have increasingly focused on how to help Ukraine militarily as Ukrainian forces struggle to fend off Russian forces with severe ammunition shortages and a major U.S. military aid package stuck in Congress.

German Chancellor Olaf Scholz and European Commission President Ursula von der Leyen are among the leaders backing the idea of ​​using revenue from frozen Russian assets to provide military aid to Ukraine.

Mr Borrell said some EU members had raised concerns about legal issues and others about the impact on financial markets. However, Mr Borrell said the European Central Bank had been closely consulted as the EU developed the proposal.

Some governments have also voiced concerns that Moscow could retaliate by seizing the Russian assets of Western companies. But Mr Borrell said the time had come to make a decision, which would require unanimous EU approval.

Mr. Borell also argued that using the revenue from frozen Russian assets to prevent Russia from destroying Ukraine makes more sense than waiting for Russia to finish destroying Ukraine and then using it to rebuild the country.