EU mulls moving Russian profits to Ukraine

Brussels — EU leaders arrived at a summit on Thursday to discuss whether to use billions of euros in profits from frozen Russian financial assets to buy arms for Ukraine as they try to bolster Kyiv in its fight against Moscow’s invasion.

The European Commission, the EU’s executive body, this week proposed taking profits from Russian assets frozen in Europe after Moscow’s invasion and transferring 90% to an EU-run fund used to finance arms for Kyiv.

The commission estimated the profits on the assets — various Russian central bank securities and cash — could be €2.5bn- €3bn a year. Russia on Wednesday described the EU plan as banditism and theft.

German Chancellor Olaf Scholz backed the European Commission’s plan as he arrived at the summit.

“These (proceeds) should first of all be used to buy those weapons and ammunition that Ukraine needs to defend itself,” he said. He added he was optimistic about the chances of the leaders uniting on the subject.

“I am quite sure that we are sending a very clear signal to Putin here ... And the use of windfall profits is a small but important component,” he said.

The idea of using the proceeds to benefit Ukraine enjoys broad support among EU governments, diplomats say. But using the money to buy weapons is more problematic for some countries.

The proposal raises questions particularly for neutral or militarily non-aligned countries such as Malta, Austria and Ireland.

“For us neutrals it must be ensured that money, for which we give our approval, is not spent on weapons and ammunition,” Austrian Chancellor Karl Nehammer said.

Attention will also focus on the reaction of Hungarian Prime Minister Viktor Orban, who maintains closer ties to Moscow than other EU leaders and opposes sending arms to Ukraine.

Others, like Belgian Prime Minister Alexander De Croo welcomed the Commission proposal. “I think it’s a sensible way of doing it,” he said.

No final decision is expected at the summit. But leaders will indicate how the EU should proceed with the proposal.

The bloc’s 27 national leaders will also debate how Europe can do more to defend itself and boost its arms industry, reflecting fears that Russia may not stop at Ukraine and the US may not be such a staunch protector of Europe in future.

“Now that we are facing the biggest security threat since World War 2, it is high time we take radical and concrete steps to be defence-ready and put the EU’s economy on a war footing,” Charles Michel, president of the European Council of EU leaders, wrote in his invitation letter for the summit.

In a two-day summit in Brussels, the EU leaders will also tackle topics as diverse as the war in Gaza, the prospect of opening membership talks with Bosnia and farmers’ protests. But Ukraine will top the agenda, with President Volodymyr Zelensky joining the leaders via video link.

EU leaders have voiced greater alarm about the state of the war in recent weeks, with ammunition-starved Ukrainian forces struggling to hold back Russian troops and a $60bn military aid package for Kyiv stuck in the US Congress.

The leaders are also expected to discuss the vexed question of how greater defence spending should be financed.

French President Emmanuel Macron and others have embraced a proposal by Estonian Prime Minister Kaja Kallas for European defence bonds. But other countries, including fiscally cautious Germany, Austria, the Netherlands and Sweden, are sceptical.

Dutch Prime Minister Mark Rutte reiterated his opposition to this as he arrived at the EU summit.

Kallas argued such borrowing was needed urgently. “The crisis is right now, here. We have to invest in defence now,” she said. “We don’t have the time to wait.”

Reuters