EU Maneuvers to Fund Ukraine Without Seizing Russian Assets

The European Union is developing a strategy to fund Ukraine's defense and reconstruction using immobilized Russian central bank assets, following Moscow's invasion. Under international law, confiscating these sovereign assets is prohibited; however, the European Commission has proposed a workaround to utilize 210 billion euros worth of frozen Russian assets without directly accessing them—a vital distinction for various member states and the European Central Bank.

At the conflict's outset, bonds managed by Euroclear for Russia's central bank were frozen. The EU plans to redirect these maturing cash balances to the newly created 'Reparations Loan'. This loan would enable Ukraine to access funds immediately, with the repayment contingent on receiving war reparations from Russia. Euroclear's bonds, matched by EU-issued zero-coupon counterparts, are central to this allocation process.

The scheme involves transferring approximately 185 billion euros held by Euroclear into a Special Purpose Vehicle (SPV) owned by EU and possibly G7 governments. In this structure, risks are collectively shared among EU member states. While some nations review legal and fiscal implications, the Kremlin lashed out, branding the proposal as theft, foreshadowing potential repercussions for seizing Russian assets.