EU to tap frozen Russian assets

The European Parliament has approved a €35 billion ($38 billion) loan to Ukraine to be repaid with revenues from frozen Russian assets, according to an official statement on Tuesday. The financing fulfils the EU’s share of a $50 billion aid package for Kiev agreed by G7 countries in June.

MEPs approved the move with 518 votes in favor, 56 against and 61 abstentions, the parliament announced. The funds will be transferred through the end of next year, it added.

Future revenues from frozen Russian Central Bank assets will be made available to Ukraine to service the EU loan and loans from other G7 partners. The statement added that Kiev may also allocate the funds “as it sees fit.”

The proposal was endorsed earlier this month by EU governments. The European Council now plans to adopt it as a regulation, and it will enter into force after its publication in the Official Journal of the EU, the statement notes.

The EU froze approximately €210 billion ($227 billion) in Russian Central Bank assets following the start of the Ukraine conflict in February 2022. Russia has denounced the move as “theft.” The immobilized assets had generated €3.4 billion ($3.7 billion) in interest as of mid-July, according to Brussels-based central securities depository Euroclear, which holds most of Russia’s funds. In July, a transfer of €1.5 billion ($1.6 billion) of that money was approved by the European Commission to support Ukraine’s “military capabilities.”

The US is reportedly planning to contribute up to $20 billion to the G7 package, also on condition that the funds are repaid using proceeds generated by the immobilized Russian assets.

The US previously expressed concern that the EU policy of reviewing Russia sanctions every six months makes repayment of the loan uncertain as it could result in a lapse in restrictions. In response, Brussels proposed extending the renewal timeframe to three years. Hungary opposed the idea and said it would delay a decision until after the US presidential election on November 5.

Kiev’s Western backers have been trying to accelerate negotiations over the loan due to mounting concern that Washington’s aid to the country could be cut off if Donald Trump returns to the White House, Financial Times reported last week. The former US president has repeatedly threatened to scale back assistance if he is elected.

Moscow maintains that any seizure of its funds is illegal under international law and would further undermine global trust in the Western financial system.