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Frozen Assets: Controversial Plans For Ukraine's Recovery

In a concerted effort to coordinate actions against Russian oligarchs, the European Commission initiated the 'Freeze and Seize' Task Force in March 2022. The initiative has since proven instrumental in freezing approximately €19 billion in assets linked to Russian oligarchs across EU Member States. Additionally, a staggering sum of around €300 billion from the reserves of the Russian Central Bank remains blocked in the EU and other G7 nations.


To utilize these frozen funds for Ukraine's recovery, the Commission has proposed a twofold strategic plan. In the short term, the institution suggested establishing a structured framework designed to actively manage these assets by strategically investing frozen funds and allocating the resulting funds to expedite aid to Ukraine. This approach seeks to harness these resources efficiently, channelling them toward supporting Ukraine's immediate needs and jumpstarting its recovery efforts.


In the long-term, the Commission foresees the eventual lifting of sanctions and, consequently, the necessity to return the assets held, particularly those belonging to the Central Bank. The Commission thus linked the return of these assets to a potential peace agreement, which would aim to compensate Ukraine for the extensive damages it has incurred due to the conflict. The assets earmarked for return could potentially offset a portion of the reparations owed to Ukraine as a result of the war. 


However, amidst these proposals, concerns have surfaced within the bloc's 27 governments. Ambassadors from various member states, including France and Germany, have expressed reservations about a proposal put forth during Spain's tenure leading the EU’s rotating six-month presidency. The states explicitly argue that this plan might not sufficiently expedite the necessary economic boost for Ukraine and could inadvertently undermine the EU's commitment to supporting Kyiv.


EU officials have long explored avenues to harness the earnings from immobilized assets, valued in the hundreds of billions, since the conflict's onset. Despite this, scepticism persists. The European Central Bank, among others, has also voiced significant apprehension, fearing potential instability in the euro currency if such plans materialize.


The criticism recently peaked at a recent meeting of EU envoys on December 5, 2023, where Spain's proposal was scrutinized. According to the proposal obtained by POLITICO and deliberated upon during the meeting, estimated potential profits from frozen Russian central bank reserves within EU nations suggest it could generate €15 billion to €17 billion for Kyiv by 2027.


Upon further conversation with POLITICO, anonymous officials highlighted discontent among several member states. They asserted that the Spanish proposal failed to align with the EU's priority of urgently supporting Ukraine, raising concerns about the extended timeline for Kyiv to access the funds. Furthermore, there was confusion surrounding the methodology behind Madrid's projected figures.


For now, the lack of clarity and a unified vision among member states have stalled the progress, leaving the strategy in the status quo, pending further clarification and consensus among the involved parties.


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