War in Ukraine: EU “in principle” agreement on use of frozen Russian assets for Kyiv

The Group of Twenty-Seven reached an “agreement in principle” on Wednesday to use proceeds from Russian assets frozen in the European Union to arm Ukraine, Belgium’s EU presidency announced. “This money will be used to support military defense and reconstruction of Ukraine,” the source said. on a social network after a meeting of EU member states’ ambassadors in Brussels, without further details.

The agreement, which has yet to be confirmed at EU ministerial level, came after a long and bitter debate over how to use Russian state assets blocked since the start of Russia’s invasion of Ukraine, which amount to around 210 billion euros in the EU. .

In March, the European Commission proposed a plan aimed at confiscating the proceeds generated by these colossal assets, which it said could free up between 2.5 and 3 billion euros a year for Kyiv. “There could be no more powerful symbol and no better use of this money than (to use it) to make Ukraine and all of Europe safer,” European Commission President Ursula von der Leyen immediately hailed in a statement. message to X.

Under the plan, 90% of the confiscated proceeds will go to the European Peace Fund (EFF), which finances arms purchases that are crucial at a time when Kyiv is demanding ammunition and air defense systems to deter the Russian army from advancing. The remaining 10% will go to the EU budget to strengthen the capabilities of Ukraine’s defense industry.

However, among the twenty-seven states, some states indicated that they feared the consequences of such a takeover, fearing the precedent it could set in financial markets and the legal consequences it would entail. In March, Russia also threatened to sue the EU “for decades” if proceeds from its frozen assets were used to benefit Ukraine, which Moscow said would amount to a “flight.”

Most of the assets are located in Belgium.

The vast majority of these frozen Russian assets are located in Belgium, where they are managed by Euroclear, the international depository organization. Last year, the group was able to generate revenue of 4.4 billion euros, an amount subject to corporate tax by the Belgian state.

According to a diplomatic source, the Twenty-Seven agreement will consist of the withdrawal of this after-tax income from Russian assets, but Belgium undertakes to redistribute to Ukraine all tax revenues received on its territory from this exceptional income. It says it has already used those tax revenues to help Kyiv in 2022 and 2023 through the creation of a national fund dedicated to Ukraine. In 2024, the tax levied in Belgium on Russian assets could reach 1.7 billion euros, of which about 1 billion has already been allocated for military assistance to Ukraine.

In addition, under the agreement, the fees that Euroclear charges for managing these Russian assets will again be significantly reduced – to 0.3% – from the original rate of 3%.