As the issue of financial aid to Ukraine stalls on both sides of the Atlantic, the United States and Europe are considering other solutions to support Kiev's war effort. Washington is considering the possibility of seizing all $300 billion in Russian assets frozen since the 2022 invasion of Ukraine, while the Twenty-Seven questions the legality of such a maneuver.
This is an urgent request from Kiev. Could Russian assets blocked in the West soon be confiscated for the benefit of Ukraine? Officially, Washington does not support the idea of seizing these frozen Russian assets. The United States, like Ukraine's other Western allies, has so far planned to confiscate only the interest on these blocked capitals to finance the Ukrainian war effort. But behind the scenes, Americans appear to be keeping a serious eye on the significant sums at stake.
The United States has suggested that G7 countries “form working groups to examine options for seizing this $300 billion.” [270 milliards d’euros NDLR] of Russian funds frozen in Western banks,” the Financial Times reported on Thursday, December 28. According to an American source at the newspaper, the G7 could make a corresponding announcement in February, around the second anniversary of the start of the war triggered by Russia.
With the support of the United Kingdom, Japan and Canada, the United States is proposing the establishment of three working groups that would study behind closed doors “the legal issues related to the seizure of Russian assets, the manner in which this policy is applied and the risk.” . “Mitigation,” said the Financial Times. The options being considered range from directly seizing the assets of the Russian Central Bank, to using the proceeds from these frozen assets, to using them as a guarantee for loans destined for Kyiv.
The valves are cut off
Ukraine, which is heavily dependent on foreign aid, experienced a decline in aid commitments over the course of 2023. According to the Kiel Institute for the World Economy, which lists commitments for Ukraine, support from allies even fell. “reached the lowest level” since the start of the war, in February 2022. Between August and October, the amount of aid announced fell by 90% compared to the same period in 2022.
And if Washington is actively investing in seeking funding for Ukraine as the second anniversary of the war approaches, it is because its own tap is currently closed. The United States continues to provide the largest financial and military support to Kyiv, with more than $110 billion pledged since the Russian invasion began in February 2022. But negotiations in the US Congress between Republicans and Democrats over the 61 billion envelope are still failing, as demanded by American President Joe Biden and his Ukrainian counterpart Volodymyr Zelensky.
Read also: The American Senate is blocking aid of almost 100 billion euros for Ukraine and Israel
Washington is therefore forced to save money and has just released on Wednesday December 27 a new military aid amount of $250 million to finance the purchase of ammunition, air defense systems and anti-tank weapons.
“I thank President Joe Biden, the Congress and the American people,” Volodymyr Zelensky responded to “Ukraine’s most urgent needs” on Thursday, December 28.
thank you @POTUS Joe Biden, Congress and the American people for the $250 million military aid package announced yesterday.
Additional anti-aircraft missiles and components, anti-tank weapons, ammunition, demining equipment and other equipment will meet Ukraine's most urgent needs.…
— Volodymyr Zelenskyy / Володиmir Зеленський (@ZelenskyyUa) December 28, 2023
Ukraine demands Russian money “as reparation”
But it is a mixed success for Kiev, as it is the last American aid available without a vote in Congress.
On the European Union side, the Commission had planned to provide Ukraine with aid worth 50 billion euros over a period of three years until 2027, consisting of 33 billion euros in loans and 17 billion euros in donations. This new aid will be crucial to Kiev, which is currently being rejected by Hungary at a time when American aid is blocked. A new summit on this topic is planned for early January 2024.
Also read: Hungary blocks an agreement on European aid to Ukraine worth 50 billion euros
In mid-December, faced with the withdrawal of his two main financial supporters, the Ukrainian president increased his calls for a solution to the issue of Russian assets.
In his daily video addressed to the nation on Sunday, December 17, Volodymyr Zelensky confirmed that he had raised the issue during his visit to the United States and indicated that the G7 was best placed to intervene .
After a visit to Washington on December 12 in the hope of unfreezing funds, Volodymyr Zelensky assured in a speech that the issue of frozen Russian assets was at the center of discussions with the Americans. The Ukrainian president called for these funds to be transferred to Ukraine “as reparations” and insisted that they would be used “to support Ukraine, protect lives and citizens from Russian terrorism.”
Be careful from Europe
In Europe, the question of Russian assets is even more controversial because they are mainly located there.
Almost 200 billion of the 300 billion euros frozen are immobilized only within the European Union. A large part of these funds belongs to the Central Bank of Russia in the form of foreign exchange reserves, to which it no longer has access since the sanctions from Brussels.
In particular, the European Union, Germany, France and Italy have expressed reservations about the idea of seizing the Russian central bank's assets. The Europeans want to ensure the legality of a seizure of Moscow's assets.
In fact, Russia is demanding the return of these frozen assets, citing international law, which raises the question of a possible return.
Currently, the Twenty-Seven is exploring the possibility of transferring the profits from frozen assets to help rebuild Ukraine. Reticent on an issue that divides its member states, the Commission proposed on December 12 a plan to set rules for income from frozen assets managed primarily by Euroclear, the international fund deposit organization where around 90% of the money is concentrated . Russian assets to the EU.
If the Commission's proposal is adopted unanimously, Euroclear will be required to separate income from Russian assets from other income, with a ban on paying it out to anyone. Only then will a new proposal for confiscation be made so that Ukraine can benefit from these funds. The amount is not official, but could reach several hundred million euros per year.
Belgium, where Euroclear is headquartered, did not wait for a green light from the Commission: it is already taxing income or interest from frozen Russian assets, as is the case with other financial institutions based in the region. Belgian Prime Minister Alexander De Croo promised last October to pay 1.7 billion euros in profits directly to Kiev.
American proposals to move up a gear are on the table; an agreement remains to be found with European countries. But as with sanctions against Russian oil, it will likely take more than a G7 summit to resolve the issue of the Ukrainian aggressor's frozen assets.