EU to redirect frozen Russian assets to Ukraine for defense boost

The European Union has prepared a draft law aiming to initiate the transfer of funds from the profits of the frozen Russian assets to Ukraine as soon as July. As Bloomberg has noted, this initiative requires the backing of all EU member states.

This plan specifies that Ukraine will benefit from a portion of the profits emanating from the frozen assets held by the Bank of Russia from February 15, 2024. The scheme outlines a biannual collection of these funds, which will continue until the lifting of sanctions against the Russian Federation. The intention is to allocate roughly $3.2 billion annually toward purchasing arms and enhancing domestic defense capabilities.

Following Russia's invasion of Ukraine two years ago, Western nations immobilized 260 billion euros ($278 billion) of the Russian Central Bank's reserves, with about $214 billion of these located within the Belgian clearinghouse Euroclear. These reserves accrue interest and investment profits daily, totaling 4.4 billion euros ($4.7 billion) last year, as Deutsche Welle highlighted.

The EU's legal interpretation suggests that these profits don't belong to the Russian state, resulting from the immobilization of the reserves due to imposed sanctions. Handelsblatt mentions that, according to EU lawyers, tapping into these extraordinary revenues would not contradict the principle of state immunity, thus offering a solid legal grounding for the plan.