EU agrees to set aside profits from frozen Russian assets

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EU member countries have backed a plan to set aside billions of euros of profits arising from the freezing of assets of Russia’s central bank in a first step towards their possible use for Ukraine’s reconstruction.

The unanimous decision on Monday — which has yet to be formalised in coming weeks — is part of the bloc’s show of support for Kyiv ahead of the second anniversary of Russia’s full-scale invasion. It also comes in the run-up to a summit on Thursday where EU leaders are expected to sign off on €50bn in financial support for Ukraine.

Of the €260bn of Russian foreign reserves immobilised in 2022 in response to Moscow’s invasion, €191bn is sitting in Belgium’s Euroclear, a central security depository, and is generating billions as securities reach maturity and are reinvested.

Under the agreement struck on Monday, profits generated by Euroclear will be booked separately and not be paid out as dividends to shareholders until EU countries unanimously decide to set up a “financial contribution to the [EU] budget that shall be raised on these net profits to support Ukraine”, according a draft text seen by the Financial Times.

That levy will be “consistent with applicable contractual obligations, and in accordance with [EU] and international law”, the text added. There is no timeline for when such a separate proposal should be made. The proposal only targets future profits and will not apply retrospectively.

Member nations will also determine what amount central security depositories will be able to keep, on top of amounts needed to cover legal and management costs.

The European Commission’s proposals on handling the assets in December stopped short of seizing the profits and transferring them to the EU common budget, given concerns from the European Central Bank and critical capitals that doing so might trigger financial instability and provoke retaliatory measures from Russia.

A separate push led by the US and backed by the UK, Japan and Canada to confiscate Russia’s assets fully, rather than just the profits, is facing resistance from European G7 members, notably Germany, Italy and France.