Frozen Russian assets? Brussels may resume proposal on use

“ Pwe have been very clear about the European Commission. We already presented a concrete legislative proposal last year and we are now prepared to support these discussions, as well as to examine different modalities and facilitate the process so that we can reach decisions”, said European Commissioner for Economic Affairs Valdis Dombrovskis.

At a press conference following the informal meeting of EU finance ministers held in Dublin by the Irish Presidency of the Council, the person responsible admitted that, although the matter was not mentioned at this meeting, “several EU Member States and also a very significant number of members of the European Parliament resumed this discussion”.

The declaration arises after the EU has not reached a consensus on the use of fixed Russian assets to finance Ukraine’s needs in 2026 and 2027, but has advanced with a loan of EUR 90 billion financed through debt contracted by the Union on capital markets.

In the meantime, the extraordinary income generated by frozen Russian assets is being used to finance the European part of the loans granted by G7 to Ukraine, contributing to its repayment.

Last December, the European Commission presented a proposal to use not only interest, but cash balances associated with Russian assets fixed in European financial institutions.

The idea was to use these balances as a basis for financing a repair loan to Ukraine, and Kyiv was expected to repay it only when Russia paid such compensation, while remaining the Russian assets immobilized.

The proposal could mobilise around EUR 210 billion, the total frozen in the EU.

However, this solution did not advance due to the lack of sufficient agreement between the Member States, particularly in view of the legal and financial fears expressed by Belgium, where most of the Russian fixed assets are deposited through Euroclear.

The country has warned of the risks of possible legal proceedings or retaliation by Russia and of the need to define guarantees protecting the Belgian institution and State from such risks.

The issue has now been relaunched by the Netherlands, Poland, Spain and Sweden, which, in a letter sent to the European Commission in August, advocated the resumption of the debate on the use of fixed Russian assets and asked for new legal and financial options to be studied to freeze them in support of Ukraine, taking into account the risks to the Member States.

It is for the Community executive to work on this subject and it may be a question of adapting the model of the repair loan, using the balances associated with the fixed Russian assets to finance Ukraine, or finding other ways to freeze those resources, including the extraordinary income, such as interest, which these assets generate.

Russia invaded Ukraine on a large scale in February 2022.