The European Union approved this Tuesday (21) the use of profits generated by Russian assets frozen by sanctions imposed as a result of its invasion of Ukraine to finance aid to this country, especially in the area of defense.
The agreement approved by the EU foresees that 90% of these extraordinary profits will go to the European Peace Support Mechanism, through which the bloc co-finances the delivery of weapons and military aid to Ukraine, and the remaining 10% will go to the effort for the recovery of the country through different community budget programs.
More than 200 billion euros of Russia’s Central Bank assets and reserves are held up in the EU due to sanctions, of which around 192 billion euros are deposited with Euroclear, a central securities depository.
The reinvestment of interest on these assets, which these entities are obliged to do, generates extraordinary profits of 2.5 billion to 3 billion euros per year in the case of the EU, which since February has required central securities depositories to separate this income from remainder of your profits.
Belgium, as Euroclear’s home country, charges corporate income tax on these profits, which is equivalent to 25% of profits, so the rules defined this Tuesday will apply to the remaining amount.
However, Belgium wants to allocate what it collects from this tax – which, according to it, will reach 1.7 billion euros in 2024 – to support Ukraine.
Securities depositories such as Euroclear will be able to temporarily retain 10% of these profits to meet capital requirements, given the financial impact of the war in Ukraine on their assets, according to a statement from the EU Council.
EU High Representative for Foreign Affairs and Security Policy Josep Borrell praised the EU decision taken based on his proposal and called for rapid implementation.
“I particularly welcome the Council’s important and urgent decision to use extraordinary revenues from Russia’s frozen assets for Ukraine. Based on my proposals, 90% will be allocated to military assistance through the European Peace Mechanism. We need to move forward immediately with its implementation,” said Borrell.