EU Turns Russia’s Own Money Against Them

The rearmament of Ukraine and support for Kyiv’s defense sector will be funded by the European Union (EU) using the proceeds from frozen Russian assets in Europe. As part of its economic sanctions package in response to Moscow’s conflict against Ukraine, the 27-nation bloc is holding around £171 billion in assets held by the Russian central bank, the majority of which is frozen in Belgium. Some EU leaders have voiced the opinion that the interest alone on these assets—which would amount to about £2.5 billion annually—would be better spent arming Ukraine or reimbursing nations who transfer arms directly to Kyiv. EU foreign policy leader Josep Borrell is determined to proceed even though this step will likely irritate Moscow.

Borrell hopes the idea will be endorsed by EU leaders at a summit in Brussels starting on Thursday. This week, most of the bloc’s foreign ministers approved. The decision is in response to warnings from Ukraine’s military leaders that their soldiers are running low on ammunition and the recent failure of US efforts to secure more funding for weaponry in Congress. A special fund that several EU nations already use to get compensated for weaponry and ammunition they deliver would be used to hold almost 90% of the money presently held by the international deposit organization Euroclear in Belgium. After strengthening Ukraine’s defense sector, the remaining 10% would be allocated to the EU budget.

According to the most up-to-date expert interpretations of the EU rules, the funding cannot be used to purchase weaponry. The European Peace Facility is a separate entity that operates outside the regular budget and is exempt from the usual legislative requirements and approvals by the European Parliament. Some countries are worried that Russia may react by taking over Western corporations’ holdings in the country.

Despite Congress’s inaction on financing the deployment of more weaponry to the front, US Defense Secretary Lloyd Austin said this week that the US will maintain its assistance for Ukraine’s military effort. A week before the conference, US defense officials could divert weaponry from Pentagon inventories and use $300 million in savings to finance a fresh military aid package for Ukraine.