Politico: The European Commission is developing a mechanism to transfer almost €200 billion in frozen Russian assets

The European Commission is developing a scheme that would allow it to transfer almost €200 billion in frozen Russian assets to rebuild Ukraine after the war.

Politico writes about this, citing several officials.

According to the publication, as one option, Commission lawyers are considering transferring the assets to a “special purpose vehicle” backed by several EU countries and others. This would give the EU more control over when and how to transfer them to Ukraine.

A potential fund for Ukraine could also be open to G7 countries, including Britain and Canada, that support the idea of asset confiscation, the EU official said, with details still being discussed. The decision would likely not require unanimity among EU countries, meaning it would bypass Hungary, which would potentially oppose it.

Under current rules, any individual country can return Russian assets by vetoing the extension of sanctions, which happens every six months. It is believed that Hungary could take such a step — the country regularly vetoes aid to Ukraine and new sanctions against Russia.

Proponents of the idea also see this scheme as a step towards the possibility of completely confiscating Russiaʼs assets and transferring them to Ukraine as punishment for its refusal to pay post-war reparations.

However, as Politico emphasizes, this mechanism currently does not provide for immediate confiscation of assets — most EU countries are opposed to it due to legal and financial risks.

Who supports the new mechanism and what are the risks?

The Baltic states bordering Russia and several other states have long called for the EU to impose full asset confiscation. The idea is being actively promoted in the European Commission by Valdis Dombrovskis, the European Commissioner for Economy from Latvia, and Kaja Kallas, the Estonian foreign policy chief.

At the same time, Germany, Italy, and Belgium oppose it. It is in Belgium that the Euroclear depository is located, which stores the bulk of Russian assets — we are talking about 183 out of 300 billion euros of Russian assets frozen in Europe.

The point is that by transferring assets to the new fund, they can be invested in riskier investments, which could bring Ukraine additional profits and increase pressure on Russia.

This would differ from the current rules, under which Euroclear is obliged to invest assets through the National Bank of Belgium at the lowest available risk-free rate of return.

Skeptics of the new fund, including Euroclear CEO Valerie Urbain, warn that in the event of losses due to risky operations, they will have to be covered by EU taxpayers.

Brussels is currently checking the willingness of EU governments to transfer frozen Russian assets into riskier investments.

To share legal and financial responsibility, Belgium wants other EU countries to take on some of the risks under the Commissionʼs proposed plan.

However, according to one EU official and a senior official from another country, the Belgian government has recently become more sympathetic to the Commissionʼs plan.

The idea of a new mechanism will be officially discussed for the first time by the 27 EU foreign ministers on August 30. Politico has seen a preparatory note, which states that during the discussion, ministers are to consider “further options for the use of proceeds from frozen Russian state assets”.

“We hear that it is now more difficult to collect money from national budgets or the EU budget. [But] we have these assets, and the logical question is how and why we are not using them yet,” said Estonia’s Deputy Foreign Minister for Legal and Consular Affairs Kerli Veski.

• In 2024, the G7 countries reached a compromise: to transfer a total of 45 billion euros in profits from frozen Russian assets to Ukraine, while leaving the capital itself untouched. However, the 18 billion euros from the EU will be paid in full by the end of the year — which is why they are again looking for a new solution regarding frozen Russian assets.

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