EU to use frozen Russian assets to pay for Ukraine's reconstruction

EU to use frozen Russian assets to pay for Ukraine's reconstruction
European Commission President Ursula von der Leyen. Credit: Belga

President of the European Commission Ursula von der Leyen has stated that the EU intends to use frozen Russian assets to pay for Ukraine's reconstruction, in spite of the significant legal and political difficulties involved in pursuing such a plan.

"Russia must pay for its horrific crimes, including for its crime of aggression against a sovereign state," von der Leyen said in a statement posted on social media and the European Commission website. "We have the means to make Russia pay."

Von der Leyen noted that EU sanctions have so far frozen up to €300 billion in Russian Central Bank reserves, while €19 billion in assets belonging to private Russian citizens have also been blocked — funds which, if mobilised, would go a considerable way toward financing Ukraine's estimated reconstruction costs of €600 billion.

According to the plan proposed by von der Leyen, however, the frozen assets would not be used directly to pay for Ukraine's reconstruction. Rather, the funds would be requisitioned and then invested, with only the proceeds from these investments initially being used to rebuild Ukraine's shattered infrastructure.

"In the short term, we could create, with our partners, a structure to manage these funds and invest them," von der Leyen said. "We would then use the proceeds for Ukraine. And once the sanctions are lifted, these funds should be used so that Russia pays full compensation for the damages caused to Ukraine."

Obstacles remain

Although von der Leyen's proposal is one that has been suggested before by Ukrainian and even EU officials, the EU has until now been reluctant to explicitly commit to such a scheme owing to concerns regarding its political and, especially, legal feasibility.

In her speech, however, von der Leyen appeared to brush these concerns aside.

"We will work on an international agreement with our partners to make this possible," she said. "And together, we can find legal ways to get to it. Russia's horrific crimes will not go unpunished."

Admittedly, von der Leyen's proposal does have something of a legal precedent: in September, the US announced that it would transfer $3.5 billion in frozen assets from the Afghan Central Bank to a Swiss-based trust fund, where it would purportedly be used to address the economic and humanitarian crisis in Afghanistan.

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Indeed, it is precisely this Afghani precedent which led the EU's High Representative of the Union for Foreign Affairs Josep Borrell to openly speak out in favour of requisitioning frozen Russian assets several months ago.

"I would be very much in favour [of seizing Russian funds to pay for Ukraine's reconstruction] because it is full of logic," Borrell said in an interview with The Financial Times. "We have the money in our pockets, and someone has to explain to me why it is good for Afghan money and not good for the Russian money."

Such a potential scheme, however, has been vehemently denounced by Russian government officials. Last month Kremlin spokesman Dmitri Peskov suggested that any attempt by Western countries to appropriate Russian funds to pay for Ukraine's reconstruction as "pure international banditry", adding that it would "contradict all thinkable and unthinkable norms of international law".

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