European officials are looking for ways to use Russian assets to pay for the reconstruction of Ukraine.

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The European Union is close to brokering a detailed plan to use frozen Russian assets to pay for Ukraine’s reconstruction, a senior official told CNBC.

The EU has confirmed that there are more than 200 billion euros ($215.5 billion) across the bloc and a separate 20 billion euros in assets belonging to the Russian central bank and Russian private individuals. These assets were subsequently frozen by the European authorities Russian invasion of Ukraine to sanction the Kremlin for its aggression.

“We had quite long discussions about it [how to use these assets to pay for the reconstruction of Ukraine]Sweden’s Anders Ahnlid, who chairs discussions among the EU’s 27 member states on the subject, told CNBC on Thursday.

“And we are now, I hope, in a position to come forward with ideas soon on how to use at least the proceeds from these immobilized assets,” Ahnlid said.

This issue is highly technical, legally complex and politically demanding.

The EU insists that Russia must pay for the damage and pain it is causing in Ukraine. European Commission President Ursula von der Leyen told CNBC in February that she would “unthinkable” that it would not be so.

In a speech in November, von der Leyen said that the idea is create a structure for managing frozen fundsinvest them then give the proceeds to Ukraine.

She added at the time that those funds should also be dedicated to reconstruction efforts once the war ends and sanctions are lifted on frozen assets.

For now, officials are focusing on the first step — using proceeds from Russian central bank assets — because they believe it would be the easiest way to avoid legal trouble. It is not clear how much money this will provide Ukraine and how quickly Kyiv would get it.

“I think the important thing is that it was confirmed [are] over €200 billion of these assets, and then you have to know how much of that is in cash, how much is in other types of assets, and then of course, [how much] you can count on,” said Ahnlid.

“If you have 100 billion [euros] and you get a 3% return, you get a number of what that would give in terms of availability for renovation in a year,” he added.

The Ukrainian government was not immediately available for comment when contacted by CNBC on Monday.

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Economists agree that there is a chance that the EU will be able to use the proceeds of Russian central bank assets legally, but there are wider concerns about how much this will actually help Ukraine.

“But that could work legally [it] it will not change the game financially,” Jacob Kirkegaard, a senior fellow at the Peterson Institute for International Economics, said by email.

The World Bank, the European Commission, the United Nations and the Ukrainian government said in March that the total reconstruction costs in Ukraine it reached 441 billion dollars.

But war pays, and the ongoing loss of life and infrastructure continues to add to the bill. One example is the recent destruction of the Nova Kakhovka dam, which caused further ecological, social and economic damage. The World Bank is still assessing the total cost.

Residents carry belongings from a boat during the evacuation of a flooded area in the Mykolayiv region, after the dam of the Kakhovka hydropower plant burst, June 10, 2023.

Oleksii Filippov | Afp | Getty Images

“If any action of this nature is to be taken, it should be taken in tandem with partners such as the United States, the United Kingdom, Japan, Switzerland and other countries,” Ahnlid said of the move to use proceeds from Russia’s frozen assets. contribute to the recovery of Ukraine.

In May, the United States approved the transfer of seized assets of a sanctioned Russian oligarch to Ukraine. US Attorney General Merrick Garland said at the time, according to Reuters, that it was the first transfer of forfeited Russian funds, but “it won’t be the last”.

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