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Europe is inching closer to using profits from Russia’s central bank’s frozen assets to fund Ukraine’s reconstruction. While this is not exactly the same as using the assets themselves for that purpose, it is a viable approximation and is consistent with similar moves in Washington.
The new law adopted by the European Union on Monday is developed in line with the conditions outlined by the G7 and establishes a legal pathway for profits generated by confiscated Russian assets to ultimately be channeled to Ukraine through the EU budget. be.
Following Russia’s invasion of Ukraine nearly two years ago, both the European Union and the G7 froze more than $300 billion in Russian central bank assets, but until now they were at a loss as to how the funds would actually be used.
Unsurprisingly, Russia greeted the news with a mixture of grumpiness and bitterness. “This is theft. It’s embezzlement of something that doesn’t belong to you,” Russian Foreign Ministry spokeswoman Maria Zakharova told Sputnik Radio.
Ms. Zakharova’s interlocutor failed to remind her that Ukraine does not belong to Russia, and that Putin’s invasion would be considered tantamount to theft by most rational-thinking people.
The ever-expressive Zakharova added that Russia “will behave like a thief, given that it has recognized this as theft,” and warned of unspecified “extremely harsh” responses.
The response could include Russia’s seizure of Western assets, but it was not immediately clear how much that would cost. Most American and European companies withdrew from Russia in the months following the invasion of Ukraine.
In the meantime, as is usually the case with anything that starts in Brussels, the process of unfreezing assets is likely to take a long time. Currently, around two-thirds of the funds in question are held within the EU, with the majority held by a Belgian clearing house called Euroclear.
The new law prohibits central securities custodians like Euroclear from using net profits and instead from Russian assets until EU member states unanimously decide to establish a mechanism for their use. This means that the proceeds must be kept separate.
The European Commission is then expected to transfer the funds to the EU budget and then to Ukraine.
“This decision paves the way for the Council to decide on the possibility of financial contributions to the EU budget collected from these net profits to support Ukraine and its recovery and reconstruction,” the EU Council said in a statement. ”. stage. “
This could generate more than $18 billion for Ukraine over four years.
“We welcome the European Council’s decision to pave the way for the use of extraordinary revenues from frozen Russian assets,” Ukrainian Foreign Minister Dmytro Kuleba told X.
He hinted that he hoped further concrete steps would be taken, saying: “Ukraine is ready to continue working with partners towards achieving the ultimate goal of making Russian assets available to Ukraine.” Told. The invaders must pay. ”
The US government has previously floated the idea of outright confiscation of Russia’s sovereign assets, but the EU believes that would be too legally risky. The European Central Bank has expressed concern about the potential negative impact on the euro. In addition, the theoretical precedent could send a signal that investors may withdraw from euro assets out of fear that their funds may also be seized one day.
As The Sun reported, the Senate Foreign Relations Committee recently passed the Rebuilding Economic Prosperity and Opportunity for Ukrainians Act, which aims to make Russia pay for rebuilding Ukraine.
The REPO law is likely to pass faster than the new EU law, but in parallel with the legal maneuvering, it will create a frightening barrage of arrows aimed at the Kremlin walls. For now, most of the attention is focused on the $95.3 billion aid package for Ukraine, Israel and Taiwan that the Senate passed early Tuesday morning.
But even if the hotly contested aid package clears hurdles in the House, more than $400 billion will still be needed to rebuild Ukraine. This is in addition to the funds needed to continue the fight against a belligerent Russia, nearly two years after the invasion began in earnest.
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