EU takes first step to channel proceeds from Russia’s frozen assets to Ukraine
The European Union has passed a law requiring central securities depositories (‘CSDs’) holding more than one million euros of assets owned by the Central Bank of Russia (‘CBR’) to account separately for the profits generated from them, saying it looks to this as a first step to channelling the proceeds to Ukraine.
‘Today’s decision, in line with G7 position, clarifies the prohibition of those transactions as well as the legal status of the revenues generated by the CSDs in connection with holding of Russian immobilised assets and sets clear rules for the entities holding them,’ the European Council said, 12 February.
‘The Council decided in particular that CSDs holding more than €1 million of CBR’s assets must account extraordinary cash balances accumulating due to EU restrictive measures separately and must also keep corresponding revenues separate. In addition, CSDs shall be prohibited from disposing of the ensuing net profits,’ it said.
The Council was clear that this is a first step towards channelling the funds to Ukraine: ‘This decision paves the way for the Council to decide on a possible establishment of a financial contribution to the EU budget raised on these net profits to support Ukraine and its recovery and reconstruction at a later stage. This financial contribution may be channeled through the EU budget to the Ukraine Facility on which the Council and the European Parliament reached a provisional agreement on 6 February 2024.’
In January, the EU agreed on a so-called ‘windfall tax’ on frozen Russian assets. Some $300 billion of Russian central bank assets were frozen by the EU, United States, Japan and Canada in 2022, after Moscow’s invasion of Ukraine. Some $200 billion of that is held in Europe, mainly in the Belgian clearing house Euroclear, according to Reuters.
