Brussels rows back on plan to tax €200 bn in frozen Russian assets

Frozen Russian central bank assets held within the EU will be segregated, the bloc proposed today (12 December), rowing back on previous promises to use windfall profits to aid Ukraine.

The news comes as western support to the war-torn nation falters, with US President Joe Biden facing Republican scepticism over continuing financial aid, and Hungary’s Viktor Orbán threatening to veto a €50 bn EU package.

The plans – formally adopted by the European Commission today, but not published – will require financial depositaries such as Euroclear to register frozen Russian assets separately, with profits withheld from shareholders, said an EU official, speaking under condition of anonymity.

Seizing Russian state profits as reparations for Ukraine remains a “long-term” objective but there’s “no deadline and no fixed condition” for doing so, the official added.

That falls short of commitments given by the Commission’s president Ursula von der Leyen in October, who told reporters she would present plans to use profits from the immobilised assets to pay for Ukraine’s reconstruction, which the World Bank said in March will cost €383 bn.

EU member states, who must unanimously agree the sanctions measures, may be responsible for the U-Turn. In public, the bloc’s leaders have agreed with the idea of von der Leyen’s pro-Ukraine stance, but behind closed doors are more cautious about setting a risky legal precedent.

Billions

The Russian central bank holds about €200 bn in the EU, of which the lion’s share is at Belgium’s Euroclear, which has so far this year gained over €3 bn in unexpected revenues from the interest.

Belgian Prime Minister Alexander De Croo has already promised to send the corporate taxes from that windfall – some €1.5 bn – directly to Ukraine.

But the securities themselves can’t be confiscated unless there’s a specific crime, and the European Central Bank has warned doing so could harm the euro’s reputation as a safe currency.

Some lawmakers, such as Lithuanian MEP Andrius Kubilius, have pushed for stronger action, arguing the scale of Russian aggression allows the bloc take countermeasures.

Earlier Tuesday, EU lawmakers and governments struck two legislative deals to criminalise sanctions violations, meaning those who circumvent restrictions could have assets seized or trading permits withdrawn, and face five years’ jail.