On Friday 30 June, the President of the European Commission, Ursula von der Leyen, explained that the EU institution was going to work on the ‘windfall profits’ generated by the freezing of Russian assets in the EU to finance the reconstruction of Ukraine.
“The Commission will come forward with a proposal and will focus prudently on the windfall profits from the immobilised assets from Russian Central Bank”, she announced at the end of the European summit.
More than €200 billion from the Russian Central Bank is said to be frozen in Europe, 90% of it in Belgium. The European Commission is expected to present its proposals by the end of July.
Ms von der Leyen pointed out that it was necessary to take into account both the political dimension - that Russia should be held responsible for its destruction - and the financial dimension - while remaining cautious about the solution to be applied.
The President of the European Council, Charles Michel, also felt that it was “right” to use some of the money for Ukraine’s future, adding that the Europeans would take account of the ECB’s comments and coordinate with their partners.
The European Central Bank, but also certain Member States such as Germany, are concerned about the impact that a mobilisation of Russian assets could have on the financial markets and the reputation of the euro.
However, according to the German Chancellor, Olaf Scholz, “nobody knows what can be done or how”. He added that the legal challenges had to be taken into account.
“It is important that the method used, which must be legally stable, does not jeopardise financial stability”, admitted Belgian Prime Minister Alexander De Croo.
“These assets, in a conceptual definition, have a role to play in financing the reconstruction of Ukraine. (...) This is an important message to the Ukrainian people. This is also an important message that we are sending to Russia”, he said, arguing that the EU should focus on “windfall profits”.
According to Mr De Croo, this would raise around €3 billion a year. The Belgian Prime Minister also cited the additional tax revenues, based on the fact that Russian assets are frozen, that clearing houses such as Euroclear pay to the Belgian State.
An ad hoc group of national experts is tasked with finding an innovative legal solution to mobilise the revenues generated by the management of the frozen assets of the Russian Central Bank and Russian public entities, which amount to more than €200 billion, more than half of which is in the form of cash or deposits with central securities depositories. He put forward two options: - prudent asset custodianship: - and/or a withholding tax on income generated by investments made using frozen assets (‘windfall contribution’) (see EUROPE 13206/3).
Nearly 25% of promised munitions already sent to Ukraine
Ms von der Leyen also pointed out that the Member States had already supplied 220,000 munitions and 2,000 missiles to Ukraine through the European munitions supply programme.
“We are on track to deliver one million rounds of ammunition by the end of the year”, she said. (Original version in French by Camille-Cerise Gessant with editorial staff)