‘New ground is being broken’: EU seizes Russian profits for Ukraine

A landmark EU decision this week to send Ukraine the interest earned by hundreds of billions of dollars in Russian central bank accounts on its territory is adding urgency to a debate over what will happen to those accounts.

The difference between the two sums is enormous.

Ukraine wants to use the estimated 210 billion euros ($228bn) of Russian central bank money held in European institutions to defeat Russia on the battlefield. The EU froze those assets in February 2022, immediately after Russia invaded Ukraine. Another 50 billion euros ($54bn) are frozen around the world.

“If the world has $300bn, why not use it?” Ukrainian President Volodymyr Zelenskyy recently said.

After years of debate, the bloc decided on Tuesday to allow Ukraine to use just the interest earned by those accounts, which the EU believes would amount to about 2.5 to 3 billion euros ($2.7bn-$3.3bn) a year.

International legal experts agree it is a big step.

“There’s no precedent for the freezing of assets on this scale, and therefore the issue of what to do with the interest was never this acute,” Anton Moiseienko, a lecturer in international law at Australian National University, told Al Jazeera. “In this sense, new ground is being broken.”

It is also separate from the 12.5 billion euros ($13.6bn) a year in financial assistance they have pledged for the next four years.

A first payment is to be made in July, representing interest earned since February, when the EU ordered financial institutions to separate profits from the principal.

The institutions will keep any interest earned between February 2022 and February 2024, possibly for reconstruction purposes, European Commission sources said.

But what about the rest?

“Right now it doesn’t seem as though the EU is in any way prepared to move on to a discussion about using the principal for Ukraine,” the diplomatic source said. “There are European institutions that are against it and a lot of member states that are against it. The EU doesn’t want to risk its reputation and its prosperity.”