EU takes action to transfer Ukraine's earnings from Russian assets.

James Coleman | 8th May, 2024.

Photo Credit.: Getty

Ambassadors from EU member states have agreed in principle to seize windfall profits from frozen Russian assets to finance arms supplies to Kyiv.

In the wake of Russia's invasion of Ukraine in 2022, EU countries froze hundreds of billions of euros worth of assets.

If the decision is approved at a gathering of EU finance ministers next Tuesday, the interest - worth up to €3bn (£2.5bn) per year - will be used to buy weapons for Ukraine.

The European Commission chief, Ursula von der Leyen, said: "There could be no stronger symbol and no greater use for that money than to make Ukraine and all of Europe a safer place to live."

European Trade Commissioner Valdis Dombrovskis also welcomed the decision.

He said the funds would have to get to Ukraine as soon as possible, with the first €1bn tranche - to be used "mainly for military support" - ideally reaching the country by summer.

The idea behind the agreement reached by ambassadors of EU member states is to use the windfall earnings from the freezing of Russian assets to pay some armament sales to Ukraine.

Hundreds of billions of euros' worth of assets were placed under lockdown by EU nations following Russia's invasion of Ukraine in 2022.

Up to €3 billion (£2.5 billion) in interest will be used to purchase weapons for Ukraine if the decision is accepted by a meeting of EU finance ministers on Tuesday.

Making Ukraine and all of Europe a safer place to live is the best use of that money, according to European Commission Chief Ursula von der Leyen.

"Russia will pay directly for its crimes," Mr Dombrovskis said.

Earlier this week, German Chancellor Olaf Scholz said around 90% of revenues from frozen Russian should be spent on arms purchases for Ukraine.

 The value of frozen Russian assets in the EU alone is estimated to be almost €211bn (£181bn).

The majority of the profits from the assets are currently being held in Euroclear, a Belgium-based clearing house.

The expropriation of the profits has been a topic of discussion among EU officials and heads of state since the start of the war.

The money had not been spent yet, though, as EU members had taken issue with a 25% tax enforced by Belgian law. The tax will now be waived by Belgium.

For a long time, the central bankers of Europe were doubtful that they would create a challenging legal precedent that would jeopardize the stability of the global financial system and discourage other nations from putting their assets in the West as safe havens.

Snatching up the interest on Russian assets that had been placed under lockdown, according to the Kremlin, was a step toward the "destruction of the legal foundations of European law and international law".