The European Commission is developing mechanisms that will allow frozen Russian assets to be used to support Ukraine. This involves the creation of so-called ‘reparation credits’ — an initiative proposed by European Commission President Ursula von der Leyen, according to the Financial Times.
According to the publication’s sources, two main options are under consideration:
Bond mechanism. Around €170 billion of Russian assets frozen in the Belgian depository Euroclear could be used to purchase zero-interest EU bonds. The proceeds are planned to be transferred to Ukraine.
Special purpose vehicle (SPV). In this case, a separate legal entity would be created to manage the financing. This scheme would allow not only EU countries but also external partners to join the project.
Both options are aimed at circumventing the legal and political objections of a number of member states.
Concerns
A number of European capitals, notably Brussels, Berlin and Paris, have previously expressed doubts. They are concerned about the risk of undermining confidence in the euro as a global reserve currency.
However, the situation is gradually changing. According to Bloomberg, Germany, which has long taken a cautious stance, has now become one of the active supporters of maximising revenues from Russian assets. The reason lies in growing concerns that the main financial burden will fall on Germany. Berlin does not rule out that this will strengthen the position of the far right within the country.
The American administration is also putting pressure on its allies. In a memo sent to the G7 countries, Washington called for consideration of ‘the innovative withdrawal of principal capital from Russian assets’ to finance Ukraine’s defence.
As the FT notes, EU finance ministers will discuss the concept of reparations loans at a meeting to be held next week in Denmark. The outcome of the discussion will show whether the European Union is ready to implement such a mechanism in practice.
