| 29 November 2023, Wednesday |

EU proposal would send proceeds of frozen Russian funds to Ukraine

On Wednesday, the European Commission put forth a proposal to use the earnings from investing Russian funds that were previously frozen as part of sanctions to make up for harm caused by Russia’s invasion of Ukraine.

The question of whether Ukraine may profit from frozen Russian assets, such as the $300 billion in reserves held by the Russian central bank and the $20 billion held by Russians on the blacklist, has been discussed by officials in the EU, the US, and other Western nations.

Moscow says seizing its funds or those of its citizens amounts to theft.

“Russia must … pay financially for the devastation that it caused,” Ursula von der Leyen, president of the EU’s executive said in a statement.

“The damage suffered by Ukraine is estimated at 600 billion euros. Russia and its oligarchs have to compensate Ukraine for the damage and cover the costs for rebuilding the country.”

European Commission officials said that one short-term option for Western nations would be to create a fund to manage and invest liquid assets – mainly cash – of the central bank and use the proceeds to support Ukraine.

The assets would be returned to their owners when sanctions were lifted, which could be part of a peace agreement that ensured Ukraine received compensation for damages.

“It’s not easy so it will require strong backing from the international community, but we believe it is doable,” one official said.

A second official said the legal distinction between confiscating assets outright and confiscating proceeds from those assets was unclear because there was no precedent for such a scheme.

However, the proposal does echo a plan Washington announced in September to transfer $3.5 billion in Afghan central bank assets into a Swiss-based trust fund that would be shielded from the Taliban and used to help stabilize Afghanistan’s economy.

The first European Commission official said there had been initial contacts with the United States on its plan for the Russian central bank assets, but it was “very early days” and the idea would be presented to a G7 taskforce in December. With regard to the frozen assets of private individuals and entities, seizing these is usually only legally possible where there is a criminal conviction.

The Commission has suggested that sanctions violations could be considered crimes that could result in confiscation.

In addition, Von der Leyen stated that the Commission was advocating the creation of a specialized court with support from the UN “to investigate and prosecute Russia’s crime of aggression.”

Moscow disputes that the invasion, which it describes as a “special military operation,” amounts to aggression, which is classified as a war crime by international law.

  • Reuters