EU Seeks Innovative Funding Strategies for Ukraine
The European Union is aiming to secure new funds for Ukraine by reallocating 200 billion euros from frozen Russian assets into a new, higher-risk investment fund that can yield greater returns.
This was reported by the publication Politico, citing its sources.
How the EU plans to raise more funds for Ukraine from frozen Russian assets
It is noted that several EU countries, such as Germany and Italy, oppose this move due to potential financial and legal complications. However, the EU hopes that utilizing only the interest (rather than the principal amount of the assets) will help avoid accusations of violating international law.
As one option, EU officials are considering transferring assets from the Belgian financial institution Euroclear, where most of the frozen funds are currently held, into a specially created fund managed by the EU itself.
According to Politico, the advantage of such a fund lies in the ability to invest assets in riskier projects that could potentially yield significantly higher returns for Ukraine. However, it remains unclear what specific investments are being contemplated.
Under existing regulations, Euroclear is required to invest assets, many of which have already been converted to cash, in the Belgian central bank. There, the returns are minimal as it is a risk-free investment.
Proponents of the new fund argue that the EU should generate more revenue from Russian state funds to be able to support Ukraine in the long term, especially in light of the protracted peace negotiations with Russia.
Another potential benefit of this approach is that the new fund could protect assets from the risk of Hungary vetoing the extension of sanctions and effectively returning these funds to Russia.
According to two sources of the publication, in recent weeks, the European Commission has held informal discussions with countries like France, Germany, Italy, and Estonia to find a legal way to keep the assets frozen, even if Hungary blocks the extension of sanctions. However, no final decision has yet been reached.
Critics warn that if the new fund’s investments fail, taxpayers in EU countries may have to cover potential losses.
The EU is seeking unconventional financial solutions as its current budget of 1.2 trillion euros is already overloaded, and a new multiannual financial framework will only come into effect in 2028.
“Finding money within the current budget will be very challenging,” − remarked one diplomat in a comment to the publication.
Moreover, due to economic constraints and the need for a unanimous decision to replenish the budget, officials are skeptical that this can be accomplished, especially since Hungary is likely to oppose such a move.
