Marta Hychko16:08, 09/04/24

A group of experts in a column for the publication emphasizes that it is time to act on the financing of Ukraine by charging interest on frozen Russian assets.

The European Union delays while Kyiv burns. Time to finance Ukraine is running out, and none of the reasons for the bloc’s inaction stand up to criticism.

Senior researcher at the Stockholm Free World Forum and adjunct professor at Georgetown University, Anders Oslund, prominent Atlantic Council staffer and former US assistant secretary of state Daniel Fried, former US ambassador to NATO and special representative for negotiations on Ukraine, Kurt Kurt , write about this in a column for Politico Walker.

Two months after promising to create a legal framework that would give Ukraine interest earned from frozen Russian assets, the EU still hasn’t taken the necessary steps to make it a reality. Time is running out for Ukraine.

At the June summit in Italy, G7 leaders, including European Commission President Ursula von der Leyen, promised to provide Ukraine with vital aid.

“We have decided to provide approximately US$50 billion using extraordinary proceeds from frozen Russian sovereign assets … at the end of the year,” von der Leyen said at the time.

This was the main decision of the G7 leaders at the summit. And for this to become possible, the EU had to pass a law that continued the freezing of sovereign Russian assets until Moscow fully paid for the war against Ukraine. This would ensure that the frozen assets remain available to earn the interest needed to repay the $50 billion transferred to Ukraine.

The decision itself was a creative compromise. The US, Canada and Great Britain would prefer to confiscate not only the interest, but the entire $300 billion. However, in the absence of consensus, this decision was approved by the heads of state and government.

The decision was still significant and important for Ukraine – approximately 50 billion dollars constitute the country’s annual budget deficit, and according to the G7 formula this will be compensated without burdening EU or US taxpayers. In addition, codifying the legal framework for interest garnishment and introducing a mechanism to monitor the use of funds will provide a “proof of concept” for the future – for example, if an agreement is reached to garnish and use the principal amount of frozen assets as compensation.

But this solution is now stuck. None of the bloc’s big players – not German Chancellor Olaf Scholz, not French President Emmanuel Macron, not even von der Leyen herself – stepped in to start implementation. 

And without EU legislation, the US is also stuck. Until the bloc creates a legal framework, the US cannot view its financing as a loan backed by real resources. Instead, it would be treated as an expense and therefore would require appropriations from Congress. It won’t happen soon enough – if at all.

Why is the EU delaying?

So why exactly is the EU stuck? The most obvious reason for the delay is simple bureaucratic inertia in the wake of the European Parliament elections. There was also a summer break while Brussels negotiates the formation of a new Commission. But all this boils down to the fact that the block is playing while Kyiv is burning.

Undoubtedly, von der Leyen is in the midst of complex negotiations with the national governments of the member countries regarding the formation of the new Commission. During such negotiations, there are always political compromises. If these funds are not used, the only possible financial substitute for Kyiv will actually be the budget of the EU and member states. 

“Of course, we recognize that there are legitimate and growing concerns about governance in Kyiv, as well as any possible monitoring mechanisms to ensure proper use of the funds provided. Such funds should not under any circumstances be influenced by or facilitate corruption. But this a technical problem that can be overcome with the help of control mechanisms, and not an excuse for inaction,” experts write.

Ukraine has been more than half way through the third year of full-scale war with Russia and has demonstrated extraordinary resilience, determination, resourcefulness and efficiency. The past few weeks have seen a shift in momentum as Ukraine has moved the war into Russian territory, attacking oil refineries, airfields and other military infrastructure, forcing Russia to significantly scale back military activity in Crimea. 

“Now the West needs to match Ukraine’s ingenuity and resilience by providing the promised $50 billion as soon as possible. None of the reasons for the bloc’s inaction stand up to criticism – especially given the EU’s vital interest in ensuring Ukraine’s success. There can be no more delay. When tomorrow the EU will hold the next meeting of the Council, it will be time to act,” the authors of the material concluded.

(C)UNIAN 2024