US and Europe move closer to using Russian resources to help Ukraine

For months, Western allies have debated how far to go in using Russian central bank assets. The United States believes it would be legal under international law to confiscate the money and give it to Ukraine, but several European countries, including France and Germany, have been cautious about the legality of such a move and the precedent it would set.

Although the United States recently passed legislation that would give the Biden administration the authority to seize and confiscate Russian assets, the desire to act in unison with Europe has largely sidelined that idea.

This month, European Union nations agreed in principle that they would be willing to use 90% of profits to buy weapons for Ukraine through the European Peace Facility, an EU facility to finance military aid and own military missions. The remaining 10% would go to reconstruction and non-lethal acquisitions, to satisfy countries such as Ireland, Austria, Cyprus and Malta, which are militarily neutral.

About 190 billion euros of Russian central bank assets are held by the Belgian central securities depository, Euroclear. The assets generate around 3 billion euros a year in interest that could be transferred to Ukraine.

However, using interest as the basis for a loan could provide Ukraine with a much larger amount of money – potentially up to $50 billion – up front. The method of delivery of the money still remains to be defined. The World Bank or another international institution could act as an intermediary.