The EU has reached a deal to seize profits from Russia’s frozen assets to fund weapons and aid for Ukraine within months.
EU senior diplomats meeting on Wednesday agreed a compromise on using the estimated €4.4bn windfall profits to aid Ukraine, smoothing over a dispute about taxation and management costs in Belgium, the country where most of the frozen assets are held.
Euroclear, a clearing house in Brussels, holds €191bn of the €260bn of Russian Central Bank assets that were immobilised by western governments in response to Russia’s invasion of Ukraine in 2022. In February the clearing house reported €4.4bn interest on the Russian funds and forecast that the Belgian government would reap €1.085bn in taxes.
The final amount for Ukraine has yet to be confirmed, but should be available in July.
The EU – wary of the legal ramifications of seizing the entire cache of Russian assets – decided it could give the profits to Ukraine, after concluding Moscow had no legal right to these funds. But finding a deal has been complicated by divisions about how to spend the money, Euroclear’s management fees and Belgium’s 25% tax on corporate profits.
Belgium has now said it is “prepared to consider” a voluntary plan to transfer the collected taxes to Ukraine from 2025, according to diplomatic sources. The Belgian climbdown was first reported by Politico.
The Belgian state is already contributing aid to buy weapons for Ukraine, but other EU countries argued the Russian windfall should be additional to – not instead of – Belgium’s regular Ukraine aid. One EU diplomat had described the profits as “a windfall tax for Belgium” and said: “It is a little unfair because nobody else has Russian money to pay for their aid for Ukraine.”
Meeting on Wednesday, the diplomats also whittled Euroclear’s management fee to 0.3%, down from the original 3% proposed.
EU member states decided that 90% of the windfall profits would go on weapons for Ukraine and remaining 10% on non-lethal aid, a split designed to assuage countries including Ireland, Austria and Hungary that cannot or do not wish to fund arms.
“EU ambassadors agreed in principle on measures concerning extraordinary revenues stemming from Russia’s immobilised assets,” tweeted Belgium’s EU presidency Twitter account. “The money will serve to support #Ukraine‘s recovery and military defence in the context of the Russian aggression.”
Welcoming the agreement, the European Commission president, Ursula von der Leyen, tweeted: “There could be no stronger symbol and no greater use for that money than to make Ukraine and all of Europe a safer place to live.”
The EU deal opens the door to a broader discussion in the G7 about using Russia’s frozen billions of assets, but many European nations, including Germany and France, are wary of a US plan to take charge of the assets, fearing a violation of international law.
Separately on Wednesday EU ambassadors began talks on plans to restrict the flow of Russian liquified natural gas (LNG) via Europe, as part of a 14th round of sanctions against the Kremlin’s ability to wage war.
The European Commission wants to impose restrictions on the transhipment of LNG in the EU to stop Russia exporting the highly lucrative gas to non-EU countries via EU ports. The EU also wants to ban new investment, goods and services to build LNG terminals in the Russian Arctic. The proposals, however, stop short of a ban on Russian LNG, which unlike most pipeline gas has continued to be imported into the EU.
EU diplomats hope to get agreement on the latest sanctions before the European elections and certainly ahead of 1 July, when the Russia-friendly Hungarian government takes over the bloc’s rotating presidency.