The European Commission has pitched a new plan to utilize the Russian Central Bank’s frozen assets to issue an extraordinary 140 billion euros to Ukraine.
The so-called “compensation loan” proposal was first previewed Ursula von der Leyen Earlier this month, during an EU speech, it was a way to continue supporting Kyiv without putting any further burden on cash-bound member states.
“This is a Russian war, and it is Russia that we need to pay,” the committee president said. “It’s not just European taxpayers who are taking the brunt of it.”
The first details of the plan were presented in a short document circulated by executives before the EU ambassadors seen by EuroNews ahead of the meeting of the EU ambassadors on Friday.
The structure envisaged by the committee is extremely complex and innovative.
It centers around Euroclear, a Brussels-based central securities depository that protects most of the Russian assets that have been fixed as part of the sanctions. The assets that were initially held as bonds gradually changed to cash pots worth 176 billion euros, with the expected future of 10 billion euros.
“Russia has a charge for this account regarding the Euroclear,” the document states.
Under the plan, Euroclear transfers the cash to the committee, which uses it to issue a zero-profit loan to Ukraine.
At the same time, the committee enters Euro Clear and “Customized Debt Contracts.” EuroClear will have no choice but to invest in recovering the transferred cash.
The total amount of the loan is 185 billion euros, but 45 billion euros will be used to back up what already exists G7 Credit Based on the windfall profit of the asset. Cash will be transferred, and windfall’s profit will no longer be generated.
This will leave up to 140 billion euros for a “compensation loan.” This is paid in a regular tranche and is subject to the terms. This support can be used to cover budget, emergency and military needs.
As agreed by EU leaders, assets remained frozen until two conditions were met.
- Russia will stop the attack war
- Russia compensates Ukraine for the damage caused
The plan envisages Ukraine to repay the loan issued by the Commission using compensation provided by Russia. The committee then repays the Euroclear, which repays Russia.
In other words, the scheme is designed as a pressure tool to ensure that Moscow is responsible for the chaos it has destroyed. However, given the Kremlin’s long-standing view, it is unlikely that the country will agree to create a ever-growing bill.
C-word
Brussels believes that the construction will avoid the complete confiscation of sovereign assets prohibited under international law. However, the innovative interpretations applied to the proposal can still promptly pose legal questions and challenges.
“Seriously, this entire operation will not touch on Russia’s sovereign assets (…), and will be temporary,” the document states.
Transfer of funds from Euroclear to the Commission must be guaranteed by 27 Member States to cover costs if sanctions are lifted early. Under current rules, sanctions must be updated every six months and rely on unanimous consent. This means that one country could derail the entire project.
As part of the plan, the committee proposes to activate the so-called “Pasarel clause” to allow for the extension of sanctions by a qualified majority, thus enhancing the predictability and stability of financial operations.
But ironically, “Passerelle” relies on unanimity.
Previous attempts to change the periodicity of sanctions updates were blocked by Hungary and left the standard at six months.
Member States are still handling the Commission’s plans, and given its size, negotiations are expected to be extended for weeks, if not months.
German Prime Minister Friedrich Merz has already expressed his support for 140 billion euros, noting that it should only be used to procure military equipment.
“We must significantly increase the costs of Russian invasion,” Meltz said. I said About a series of social media messages released on Thursday.
“We also need to have partners from around the world who are frozen Russian assets join the instrument. We will coordinate closely with our G7 partners for this purpose.”
In particular, Merz used the term forfeiture to describe the operation. The word is not entirely in the committee’s documents.
In a recent interview with CBS News, French President Emmanuel Macron strongly opposed the prospect of forfeiture, calling it a “confidence issue.”
“We respect international law,” Macron said. “We are predictable and we don’t do all the impossible with these frozen assets.”
In a statement, an Euro spokesman urged the risk to be “appropriately mitigated.”
“A lawsuit or agreement must avoid undermining confidence in international financial markets by protecting the legal order and legal certainty that underpins the world economy, such as the principle of immunity from sovereignty and the protection of ownership,” the spokesperson told Euronews.
The latest moves from Brussels coincides with A drastic U-turn “Ukraine is in a position to fight and win everything in Ukraine in its original form, with support from the European Union.”
