The European Union (EU) has announced plans to send Russian money to Ukraine, starting in the first week of August 2023. EU top diplomat Josep Borrell stated that the first tranche of interest accruing on some €300 billion worth of frozen Russian assets, totaling approximately €1.4 billion, will be sent to Kiev to fund arms purchases for Ukraine’s military needs.
The EU’s top diplomat clarified that the funds will be used to address key requirements of Kiev’s armed forces, including air defense systems, artillery equipment, and procurement support for the Ukrainian defense industry. This marks a shift in policy, as the bloc will not only provide military support to Ukraine but also promote self-reliance by supporting its defense industry directly. Borrell emphasized that this approach is both logical and efficient.
Following the escalation of the conflict in Ukraine in 2022, the EU and G7 countries blocked approximately $280 billion (€260 billion) worth of sovereign funds belonging to the Central Bank of Russia. The majority of these frozen assets are held within the EU, primarily in Euroclear, a Belgium-based depositary and clearing house.
Earlier this year, EU authorities approved a scheme that enables the confiscation of interest accumulated on the frozen funds to support Ukraine’s recovery and military defense efforts. Under this agreement, 90% of the money is expected to be directed towards an EU-administered fund for Ukrainian military aid, with the remaining 10% allocated to provide assistance to Kiev in various forms.
Russia has repeatedly expressed its strong opposition to any measures that involve the transfer of its assets without its consent. Moscow claims that such actions constitute “theft” and violate international law. In response, Russia has threatened retaliation against entities that attempt to access its assets. Additionally, Kremlin spokesman Dmitry Peskov warned that expropriating Russian sovereign funds could establish a dangerous precedent and essentially be the end of the Western economic system. He emphasized that Russia would undoubtedly launch legal proceedings against those who attempt to seize its assets.
As Ukraine continues to defend itself against the ongoing conflict with Russia, the EU’s decision to send Russian money for arms purchases signifies a significant shift in policy and support for the war-torn nation.