The European Union is looking to secure new funding for Ukraine by reallocating 200 billion euros from frozen Russian assets into a new investment fund that can offer higher returns.
This was reported by Politico, referencing its own sources.
How the EU plans to raise more funds for Ukraine from frozen Russian assets
It is noted that some EU countries, such as Germany and Italy, oppose this move due to potential financial and legal challenges. However, the EU hopes that utilizing only the interest (rather than the principal amount) will help avoid accusations of violating international law.
As one option, EU officials are considering moving assets from the Belgian financial institution Euroclear, where most of the frozen funds are currently held, into a newly established fund managed by the EU itself.
According to Politico, the advantage of such a fund lies in its ability to invest assets in riskier projects that could potentially yield much greater profits for Ukraine. However, it remains unclear what specific investments are being considered.
Under current regulations, Euroclear is required to invest assets, many of which have already been liquidated, in the Belgian central bank, where returns are minimal due to the risk-free nature of the investment.
Proponents of the new fund argue that the EU needs to generate more profits from Russian state assets to be able to support Ukraine in the long run, especially considering the protracted peace negotiations with Russia.
Another potential benefit of this approach is that the new fund could protect the assets from the risk that Hungary might veto the extension of sanctions and effectively return those funds to Russia.
According to two sources from the publication, in recent weeks the European Commission has held informal discussions with countries like France, Germany, Italy, and Estonia to find a legal way to keep the assets frozen even if Hungary blocks the extension of sanctions. However, a final decision has not yet been reached.
At the same time, critics warn that if the new fund makes unsuccessful investments, taxpayers in EU countries may have to cover potential losses.
The EU is searching for unconventional financial options as its current budget of 1.2 trillion euros is already strained, and a new multiannual financial plan will not take effect until 2028.
“Finding money within the current budget will be very challenging,” − noted one diplomat in a comment to the publication.
Moreover, due to economic constraints and the need for a unanimous decision to replenish the budget, officials doubt that this can be achieved, particularly because Hungary is likely to oppose such a move.