The European Union announced Tuesday that it has reached an agreement to use the profits from frozen Russian assets to purchase arms for Ukraine and to help rebuild that country. The EU controls about $225 billion in frozen Russian assets, and the profits from those assets will generate about $3.3 billion annually.
The European Commission chief, Ursula von der Leyen, said: "There could be no stronger symbol and no greater use for that money than to make Ukraine and all of Europe a safer place to live."
European Trade Commissioner Valdis Dombrovskis also welcomed the decision.
He said the funds would have to get to Ukraine as soon as possible, with the first €1bn tranche - to be used "mainly for military support" - ideally reaching the country by summer.
"Russia will pay directly for its crimes," Mr Dombrovskis said.
Earlier this week, German Chancellor Olaf Scholz said around 90% of revenues from frozen Russian should be spent on arms purchases for Ukraine.
The decision still needs approval from EU finance ministers, who will meet on May 28 to finalize the plan.
The Russians are not happy, and Putin's spokesman, Dmitry "Pornstache" Peskov, proved irony was not only dead but buried in an unmarked grave by saying, "Russia would regard the seizure of revenue from its frozen assets in the European Union as a violation of all norms of the global economic system."
G7 finance ministers are meeting in Italy this week ahead of the June 13-15 G7 Summit to devise a plan to reach even deeper into Putin's pockets.
Treasury Secretary Janet L. Yellen said in an interview on Sunday that several options for using $300 billion in immobilized Russian assets remained on the table. But she said the most promising idea was for Group of 7 nations to issue a loan to Ukraine that would be backed by profits and interest income that is being earned on Russian assets held in Europe.
Finance ministers from the Group of 7 will be meeting in Italy later this week in hopes of finalizing a plan that they can deliver to heads of state ahead of the group’s leaders meeting next month. The urgency to find a way to deliver more financial support to Ukraine has been mounting as the country’s efforts to fend off Russia have shown signs of faltering.
Reparations are legal under international law, and the UN General Assembly and the G7 have already declared that Russia is liable for reparations for its illegal invasion of Ukraine.
BACKGROUND:
Putin's War, Week 38. The Lines Clarify and Everyone Is Getting Ready for the Next Phase
Once the EU and G7 have acted, the US government can be expected to move forward in implementing the FAFO—sorry, I mean the REPO ACT—which permits confiscating Russian sovereign assets and using that money to fund Ukraine reconstruction.
BACKGROUND:
Senate Panel Votes to Sic the Repo Man on Frozen Russian Assets
The West Will Make Russia Pay to Rebuild Ukraine and This Is How That Will Happen
Sad Faces in the Kremlin As the House Sends Ukraine Aid Package to Almost Certain Senate Approval
💬 #Zakharova: Any EU encroachment on Russian assets is illegal and violates the principles of international law.
— MFA Russia 🇷🇺 (@mfa_russia) May 23, 2024
❗️ The European Union can no longer be regarded as a reliable jurisdiction for foreign investors whose investments can be looted at any moment. pic.twitter.com/SE8kVRcLTg
For all of its whining about the "global economic system," Russia has been engaged in a drunken bacchanalia of expropriation.
Western banks still operating in Russia are essentially being expropriated one by one. In the last two weeks, JP Morgan and Unicredit have had their assets frozen, today the same happened to Deutsche Bank. Is Raiffeisen next?https://t.co/VU7FcNmOuV
— Janis Kluge (@jakluge) May 18, 2024
Commerzbank is the next target: Assets worth 93.7 million euros frozen.https://t.co/KuhtdTgqFb https://t.co/HKF8zm8xBY
— Janis Kluge (@jakluge) May 18, 2024
Putin now kicks his looting into high gear, seizing cash and assets wherever he can find them.
— Jay in Kyiv (@JayinKyiv) May 18, 2024
Yesterday, the Russian government demanded IKEA pay $140,000,000 for some fabricated tax penalty and today they seize €463,000,000 from Unicredit.
It's all getting started. pic.twitter.com/hpcd1ZS3bh
Putin ally Dmitry Medvedev has previewed the Russian strategy.
Medvedev, a close ally of President Vladimir Putin and the deputy chairman of Russia's Security Council, said on Saturday that Russia would not be able to retaliate in kind against any U.S. seizure of its reserves.
"The reason is clear - we do not have a significant amount of American state property, including money, rights and other US assets. Therefore, the answer can only be asymmetrical. It is not a fact that it will be any less painful," Medvedev wrote on his official Telegram channel.
"We are talking about the foreclosure, for example by a court decision, on the property of private individuals located in the jurisdiction of Russia (money, real estate and movable property in kind, property rights)."
"Yes, this is a complex story, since these individuals usually acted as investors in the Russian economy," Medvedev said. "And we guaranteed them the inviolability of their private property rights. But the unexpected happened - their state declared a hybrid war on us. This must be answered."
If I were developing a Russian response, it would be exactly like the one being executed by Moscow. I'd punish companies and individuals who elected to continue to invest in Russia after the Ukraine invasion as an object lesson to anyone else thinking of sinking their money into Russia.
The West's decision to follow through on holding Russia, rather than Western taxpayers, liable for reparations is a good thing. Russia will discover at some future date that the West's actions will not stop foreign investment by any country that doesn't contemplate attacking an unoffending, weaker neighbor. China, which does harbor those thoughts, will continue to invest in the West because there is a rule of law. On the other hand, it is difficult to see any of the companies victimized by Putin reentering the Russian market once this war is over.
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