EU deal will release £2.6bn frozen Russian assets to Ukraine yearly

The European Union has struck a deal to send up to £2.6 billion a year to Ukraine from frozen Russian assets.

The tentative agreement on using interest made on Moscow’s assets to buy weapons was struck by EU ambassadors meeting in Brussels on Wednesday.

Kyiv has long called for the funds to be used to help it fight off renewed Russian attacks.

“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,” said Ursula von der Leyen, the European Commission president after Belgium announced the breakthrough.

The EU froze about £181 billion in Russian central bank assets after Vladimir Putin’s illegal invasion of Ukraine. Most of this is held by Euroclear, a financial services company based in Belgium.

Belgium to channel tax into common fund

The plan to use the profits from the frozen assets was delayed by tough negotiations, which were complicated as Belgium was preparing to take a chunk of the windfall through its corporate tax.

Belgium, as the current holder of the EU presidency, was also trying to broker the deal in inter-governmental talks, and was under pressure from Western allies including the US.

It claimed it was already spending most of the levy on weapons for Ukraine, but the breakthrough was only reached when it pledged to channel the tax revenue into an EU or G7 fund.

“Belgium will provide a written statement promising that the 25 per cent tax they levy on Euroclear goes into an EU or G7 fund for Ukraine from 2025,” an EU diplomat told The Telegraph.

10 per cent of the funds have to be considered general aid as a safeguard for Hungary, which refuses to supply weapons to Ukraine.  The other 90 per cent can be spent on weapons and ammunition.

Legal safety net for company holding funds

Under the agreement in principle, which must still be approved by member states, Euroclear will be paid a 0.3 per cent management fee. This was originally a 3 per cent fee.

Euroclear will be allowed to put aside 10 per cent of the windfall profits as a safety net in case Russia starts litigation, EU diplomatic sources said.

Any funds not used from the safety net will be sent back to Ukraine’s coffers.

The breakthrough increases the chances of the money being sent to Ukraine by July, just after Belgium’s six-month term helming the EU presidency ends.

EU ambassadors also held talks on Wednesday about a 14th round of sanctions against the Kremlin.