A Profitable Sanction

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The European Union (EU) on Tuesday formally approved a novel plan to use interest accrued from frozen Russian assets in the bloc to support Ukraine’s defense, a decision that Kyiv said was welcome but insufficient, Reuters reported.

Ministers from the EU’s 27 nations rubberstamped an agreement reached in early May to use profits from Russian central bank assets held in the bloc to help Ukraine. The move is a first step amid the swirl of debate among Western powers on whether and how to use some $300 billion worth of assets while staying within legal boundaries.

“(The) EU will be obliged sooner or later to return to our country what has been stolen,” Moscow’s acting envoy to the EU, Kirill Logvinov, told Russian journalists, citing “unpredictable consequences for the Eurozone.”

The Group of Seven (G7) nations froze assets held outside of Russia soon after Russian President Vladimir Putin launched a full-scale invasion of Ukraine in February 2022. More than $200 billion was seized in the EU alone.

For over two years, Western allies have been divided on how to use the money.

While the United States pushed for using it to support Ukraine, nations including France and Germany warned about the legality of such a move, the Washington Post wrote.

The new agreement is a compromise, allowing the EU to use so-called windfall profits – or, in the bloc’s words, “extraordinary revenues.” Brussels expects the assets to generate around $20 billion by 2027.

Ninety percent of the profits will be used to support Ukraine’s military response against Russia, while 10 percent will go into helping Kyiv in non-lethal ways – a request from countries including Ireland that do not wish to fund military aid.

While expressing his “gratitude,” Ukraine’s Foreign Minister Dmytro Kuleba said his government’s goal remained the confiscation of the assets themselves.

This week, US Treasury Secretary Janet Yellen will attempt to reach an additional agreement with G7 finance ministers to extract additional money.

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