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EU countries have agreed to use an estimated €3bn in profits arising from Russia’s frozen state assets to jointly buy weapons for Ukraine.
The deal struck by the bloc’s 27 ambassadors on Wednesday only targets profits made by Belgium’s central securities depository Euroclear, where about €190bn of Russian central bank assets are held. Western nations immobilised Russia’s state assets abroad in 2022, in response to its full-scale invasion of Ukraine.
The European Commission expects Euroclear to hand over about €3bn a year which will be transferred to the bloc’s funds biannually, with a first payout expected in July. The measure will apply to profits Euroclear starts accruing as of mid-February 2024.
Of that, 90 per cent would be used for buying arms and military equipment for Kyiv’s forces, while the remaining 10 per cent would be used for reconstruction. That split assuages concerns by militarily neutral EU countries Austria, Malta, Cyprus and Ireland who want a share of profits to finance non-military purposes.
The move, months in the making, comes after EU members including Germany, Italy and France dismissed Ukrainian demands backed by the US to confiscate about €260bn in underlying Russian state assets immobilised abroad. Berlin, Paris and Rome said such a radical step could have legal and financial repercussions.
The US has separately also proposed to issue about $50bn in debt for Ukraine and repay it with expected future profits from Russian state assets.
That plan would generate more cash for Kyiv, but the EU says that it is too complex and lengthy, when the priority should be to get the money to Ukraine quickly.
Euroclear has made about €5bn in net profits from the Russian assets since the start of Moscow’s invasion of Ukraine. Of that, net profits generated until mid-February this year will stay with Euroclear and act as a buffer against legal claims.
Euroclear will also keep 0.3 per cent of future profits as an incentive fee, and temporarily hold back 10 per cent for financial stability reasons, which would eventually be transferred to the EU.
Belgium, which levies a 25 per cent corporate tax, has earned about €1.6bn since the start of the war from Euroclear’s profits linked to Russian assets. Prime Minister Alexander De Croo said his country allocated those revenues “to Ukraine-related expenses”.
This year, tax revenue from Euroclear linked to Russian assets is expected to rise to €1.7bn, of which €1bn has been earmarked for military aid to Kyiv, according to the Belgian government.
Following pressure from the US and fellow EU member countries to forgo that tax income, Belgium has said it will be open to a “voluntary arrangement” with EU and G7 partners for corporate tax revenue from profits arising from Russian assets from 2025.
De Croo said this should be done “in step with EU and G7 partners that holds such assets as well”, and that this could “significantly leverage and sustain our financial support for Ukraine and help them win this war”.
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