by Julia Payne and Andrew Gray
BRUSSELS (Reuters) – European Union (EU) member states, including France and Germany, are opposed to the idea of issuing bonds to maximize the impact of revenues generated by frozen Russian assets to to help Ukraine, diplomats said Friday.
European leaders discussed Thursday and Friday in Brussels the possibility of using billions of euros from frozen Russian assets to provide additional support to Ukraine, including the purchase of weapons, in its war against Russia.
The latter denounced this project, which it describes as theft with “catastrophic consequences” for the banks.
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The European Union’s desire to act urgently to help Kyiv reflects growing concern over Ukraine’s difficulties on the ground in containing Russian troops while aid from the United States has stalled.
European leaders agreed to work on a proposal that would channel revenue from the assets into an EU-run fund for arms purchases.
Belgium, which holds the rotating presidency of the European Union, however wishes to go further with a new issue of European bonds (“eurobonds”) for defense.
The United States is also in favor of a similar mechanism, according to diplomats.
“The revenue we have is around 3 billion (euros), it’s good to use it, but we could also use it to go to the capital markets and use it as interest payment annual, which would make it possible to obtain a much larger volume”, declared the Belgian Prime Minister, Alexander De Croo.
However, he tempered his remarks on Friday admitting “that today, it is perhaps too early to do so”.
Several European diplomats confirmed that the idea of a bond issue had been launched.
But it may struggle to gain traction as Germany, France and other countries have expressed opposition, diplomats said.
“The Belgians have already launched this idea, but it has not had much success so far,” commented a diplomat.
Under the current EU framework, income from assets, such as interest payments, would go to the European Peace Facility (EFF), an off-budget fund that provides military aid to countries outside the EU and which was used mainly for Ukraine.
About 70% of all Russian assets tied up in the West are deposited with Belgium’s Euroclear, which has the equivalent of 190 billion euros of securities and cash from Russia’s central bank.
The EU is proposing to use income from assets held in Europe rather than the assets themselves.
European Commission President Ursula von der Leyen said on Thursday that the EU would be ready to use the first billion euros of revenue from Russian assets for Ukraine from the beginning of July.
(Reporting Julia Payne, Gabriela Baczynska, Andreas Rinke, John Irish, Jan Strupczewski, written by Ingrid Melander; French version Kate Entringer)
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