The EU has tried many different ways to capitalize on the principal of frozen Russian assets to fund Ukraine’s war effort. The latest, described by one official as “legally creative,” would consist of letting Ukraine borrow money from the frozen assets against an “EU IOU.”
“Ukraine will only pay back the loan once Russia pays for the reparations,” Commission President Ursula von der Leyen said in her State of the Union speech on Wednesday.
Commission officials privately floated the plan to deputy finance ministers in Brussels on Thursday. According to Politico, the idea was met with cautious interest, but no formal commitments were made. One official said a detailed proposal could follow soon.
Following Russia’s invasion of Ukraine in 2022, Western countries froze Russian bank accounts, real estate properties, stocks, bonds, luxury assets, and various investments held by Russian entities and oligarchs. The funds also involve around €275 billion in central bank assets across the EU, the United States, Japan, and Canada. Last year, the European Council decided to channel billions of euros in interest from frozen Russian central bank assets into military aid for Ukraine.
99.7% of the return on the frozen Russian central bank assets have been channeled to Ukraine via the European Peace Facility (EPF)—a fund that is supposed to “enhance the EU’s ability to prevent conflicts, build and preserve peace.”
Two major hurdles to the new idea immediately present themselves. First, paying back the loan “once Russia pays for the reparations” sounds like it will happen when hell freezes over; and second, the idea would have to be unanimously approved by all 27 member states—something that’s likely to occur at about the same time.
