EU Proposes Utilising Frozen Russian Assets to Bolster Ukraine’s Defence

The European Union is considering a bold move to channel a significant portion of revenues from frozen Russian assets towards bolstering Ukraine’s military capabilities.

This proposal, put forth by the EU’s foreign policy chief, Josep Borrell, suggests directing 90% of the frozen asset revenues to an EU-managed fund aimed at financing weaponry for Ukraine.

Borrell’s proposal, set to be formally presented to the EU’s 27 member states, has sparked discussions ahead of an upcoming summit of EU leaders.

At its core, the plan entails diverting funds from Russian assets immobilised in Europe to the European Peace Facility, an off-budget fund primarily dedicated to providing military aid to non-EU nations, with a notable focus on Ukraine.

While acknowledging potential ramifications on EU-Russian relations, Borrell emphasised the imperative of decisive action in assisting Ukraine’s defence efforts.

The scale of funds involved is substantial, with a significant portion of Russian assets frozen in Western financial institutions, particularly in the Belgian central securities depository Euroclear.

Borrell estimates the yearly revenue potential from these assets to be around three billion euros.

Despite acknowledging the displeasure this move may evoke from Moscow, Borrell underscores the necessity of leveraging these resources to prevent further destabilisation in Ukraine.

Crucially, Borrell’s proposal delineates a dual-purpose allocation of the frozen asset revenues.

While 90% would be directed towards financing military equipment for Ukraine, the remaining 10% would be allocated to bolstering the defence capacity of Ukrainian industries, thereby fostering long-term resilience against external threats.

This nuanced approach aims to address immediate military needs while simultaneously investing in Ukraine’s self-sufficiency in defence production.

However, Borrell’s proposal has not been immune to scrutiny within the EU; concerns have been raised regarding legal implications and potential repercussions on financial markets.

Additionally, apprehensions persist over potential retaliatory measures by Moscow, including the seizure of Western companies’ assets in Russia.

Despite these reservations, Borrell underscores the urgency of the situation, advocating for swift and unanimous approval from EU member states.

The proposal reflects a strategic reorientation within the EU, shifting from discussions of post-conflict reconstruction towards immediate military support for Ukraine.

This shift in focus underscores the escalating urgency as Ukrainian forces confront a protracted conflict with Russia, compounded by delays in the disbursement of a significant U.S. military aid package.

Key EU leaders, including German Chancellor Olaf Scholz and European Commission President Ursula von der Leyen, have voiced support for redirecting frozen asset revenues towards military aid for Ukraine.

Borrell’s assertion that proactive intervention is preferable to reactive reconstruction resonates with leaders who perceive the imperative of preserving Ukraine’s territorial integrity and sovereignty.