European Union is developing new scheme to profit from frozen Russian assets - Politico
The European Union is seeking to recover billions of euros from frozen Russian assets by moving them into "riskier investments" through a plan that would increase aid to Ukraine while avoiding accusations of "stealing" Moscow's money.
According to Censor.NET, Politico reports.
In particular, the EU is considering transferring almost 200 billion euros of frozen Russian state assets stored in Belgium to a new, riskier investment fund that will pay higher interest, four officials familiar with the process told the publication.
The goal is to generate more profits to help keep Ukraine's war-torn economy afloat amid threats from U.S. President Donald Trump to cut off funding.
At the same time, the move will not lead to a complete confiscation of Russian assets, which some EU countries, including Germany and Italy, oppose due to financial and legal concerns.
The EU hopes that by spending only the profits from the assets and leaving the capital intact, it will be possible to avoid accusations of violating international law.
Last year, the G7 countries agreed to provide Ukraine with 45 billion euros in proceeds from frozen Russian assets. However, the EU's €18 billion share of the G7 loan will be fully disbursed by the end of the year, raising the question of how Ukraine's financial needs will be met in 2026.
Finance ministers from 27 EU countries will begin discussions on Thursday, June 19, at an informal dinner in Luxembourg.
"It is important that we hear from the European Commission about the options available, especially regarding the potential use of frozen Russian assets and further steps on the sanctions regime," Poland, which holds the rotating EU Council presidency and organized the meeting, wrote in an invitation letter to the ministers.
Warsaw also suggested that the EU's new SAFE defense loan program could be used to buy weapons for Ukraine.
Thursday's meeting will be the start of months of tense discussions as European capitals with "overstretched" budgets are increasingly torn between continuing to support Ukraine and domestic priorities.
The EU's workaround
As a potential workaround, EU officials are considering transferring the assets from the Belgian company Euroclear to a "special purpose vehicle" under EU auspices.
The main advantage of quickly setting up a new fund is that the assets can be allocated to riskier investments that could bring Ukraine much higher returns. Officials did not specify what kind of investments they might be talking about.
Under its rules, Euroclear is obliged to invest assets - many of which have already turned into liquid cash - in the Belgian central bank, which offers the lowest available risk-free rate of return.
In 2024, the profits earned from such investments amounted to 4 billion euros, which were later used for a G7 loan to Ukraine.
Proponents of the new investment fund argue that the EU needs to generate more revenue from frozen Russian assets to support Ukraine in the long run.
Another potential benefit is that it could be a useful hedge against the risk that Hungary will try to veto the extension of sanctions and effectively return the money to Russia.
Russian assets are blocked by the EU sanctions regime, which must be unanimously renewed every six months, and the Hungarian government, which traditionally opposes initiatives to help Ukraine, has repeatedly threatened to use its veto.
In recent weeks, the European Commission has held informal talks with a group of countries, including France, Germany, Italy, and Estonia, to explore legal ways to keep the frozen assets if Hungary blocks the sanctions extension, two officials told Politico. But the working group has not developed a workaround to achieve this outcome.
Tough budget arithmetic
EU officials are looking for ways to approve the creation of the new fund by a simple majority vote, as opposed to unanimity, to circumvent expected opposition from Hungarian Prime Minister Viktor Orban.
Critics of the plan to create a new financing mechanism, however, warn that EU taxpayers will ultimately be forced to pay compensation for any potential unproductive investments.
The EU is looking for creative solutions as its €1.2 trillion "central budget" that governs all public spending is stretched thin, and the new budget will not take effect until 2028.
"It will not be easy to find money within the current multi-year financial program," said one European diplomat.
A significant portion of the 50 billion euros that the EU approved for Ukraine in 2023 and was expected to be spent by the end of 2027 has already been spent.
In addition to economic constraints, officials are skeptical about the idea of further replenishment of the EU's central budget, as it requires unanimity, and Hungary is likely to resist.
