EU discusses using proceeds from frozen Russian assets to arm Ukraine

by Andrew Gray and Jan Strupczewski

BRUSSELS (Reuters) – European Union heads of state and government discussed a proposal in Brussels on Thursday to use billions of euros from frozen Russian assets to allow Ukraine to buy weapons , in order to help Kyiv in its fight against the Russian invasion.

The Twenty-Seven were also due to debate how Europe can do more to defend itself and boost its arms industry.

During this two-day summit in Brussels, they will also address subjects as diverse as the war in Gaza, the prospect of opening EU accession negotiations with Bosnia or the farmers’ demonstrations.

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Ukrainian President Volodimir Zelensky addressed European leaders via video conference on Thursday, calling on them to provide more air defense systems and use Russian assets to save Ukrainian lives.

“Russia must feel the real cost of this war and the need for a just peace,” the Ukrainian president said, adding that using billions of euros from frozen Russian assets to arm Ukraine was “right” in order to “stop the terror”.

European leaders have expressed their concern in recent weeks about the war in Ukraine, while the Ukrainian army, deprived for months of support from the United States due to obstruction by Republican elected representatives in Congress, is struggling to repel the Russian forces, due to lack of sufficient ammunition.

The European Commission on Wednesday proposed providing up to three billion euros in aid each year to Ukraine from revenues from the Russian central bank’s frozen assets held in Europe.

The total amount of this aid will depend on interest rates which affect the returns on frozen Russian assets held in the EU.

Ukraine will also receive profits from the 25% tax that the Belgian government imposes on these revenues. In 2024, this tax should reach 1.7 billion euros, and 1.5 billion euros will be paid this year.

Russia has described the EU plan as banditry and theft.

German Chancellor Olaf Scholz said he was in favor of this initiative upon his arrival in Brussels.

“These (profits) should first be used to buy weapons and ammunition for Ukraine which needs to defend itself,” Olaf Scholz said, sharing his optimism about the chances that the leaders will agree on this point. .

“I’m pretty sure we’re sending a clear message to Putin here. He’s miscalculated if he thinks we’re not able to support Ukraine for as long as necessary.”

“The use of windfall profits is a small but important element,” added the German Chancellor.

Diplomats said the idea of ​​using the revenue to help Ukraine was popular with EU governments. Using this money to buy weapons, however, remains more problematic for certain countries.

EYES ON ORBAN

The reaction of Hungarian Prime Minister Viktor Orban, who maintains closer ties with Moscow than other EU heads of state and government and opposes arms deliveries to Ukraine, will be particularly scrutinized.

The proposal also raises questions for neutral or militarily non-aligned countries such as Malta, Austria or Ireland.

“For us, neutral countries, we must ensure that this money is not spent on weapons and ammunition,” said Austrian Chancellor Karl Nehammer.

Belgian Prime Minister Alexander De Croo welcomed the Commission’s proposal.

“I think it’s a reasonable way to proceed. I think the idea of ​​allocating (the frozen assets) primarily to the purchase of weapons makes perfect sense,” he said.

No final decision on the issue is expected at the summit, but leaders are expected to provide guidance on the future of the proposal.

“As Russia’s war of aggression against Ukraine is now in its third year, we are at a crucial moment,” European Council President Charles Michel wrote in his letter inviting the summit.

“Urgency, intensity and unwavering determination are imperative.”

A draft statement says the leaders “reviewed progress” on using the revenue “for the benefit of Ukraine, including possibly to finance military support” and calls on EU bodies to “advance the works”.

It also says that the EU “is committed to increasing its defense preparedness and capabilities in order to meet its needs and ambitions” in the face of “increasing defense threats and challenges.” of security”.

The text also calls on officials to consider a proposal from the European Commission that aims to help the European defense industry better prepare for major existing and potential challenges, including by acquiring defense equipment in a collaborative manner.

Diplomats also worked to find a balance in the text that would satisfy Israel’s close allies – such as Hungary, the Czech Republic and Austria – as well as fervent defenders of the Palestinians – such as Spain, ‘Ireland and Belgium – about the war in Gaza.

“The text we currently have is fragile. I hope that, fragile as it is, it will remain,” declared a senior European diplomat.

European leaders are also expected to debate the issue of financing the bloc’s military spending.

In an interview with Reuters, Estonian Prime Minister Kaja Kallas proposed appointing a European Commissioner dedicated to the defense industry.

“The crisis is now, here. We must invest in defense now,” she said. “We do not have time to lose”.

(With contributions from Gabriela Baczynska, Philip Blenkinsop, John Irish, Nette Noestlinger and Andreas Rinke; French version Camille Raynaud and Zhifan Liu, edited by Kate Entringer)