The recent destruction of the Trypilska power plant in Ukraine has left the country facing shortages of both anti-missile ammunition and financial support. While the lack of ammunition is attributed to limited industrial capacity, the shortage of money is seen as a result of limited political will among Ukraine’s allies.
One area where progress is being made is in the discussion around what to do with Russia’s frozen assets, worth €260bn. After Putin’s invasion of Ukraine, Western governments froze these assets, but until recently, no consensus had been reached on how to utilize them.
However, there are now signs of change. American and British officials have expressed support for using the interest income on these frozen assets to benefit Ukraine. By seizing the income earned on Russia’s foreign holdings, Western governments can provide much-needed financial support to Ukraine in a legal and practical manner.
One proposed approach is to transfer the net present value of the income stream to Ukraine, potentially yielding €3.3bn a year. This revenue could be used to service EU debt, with the remaining funds sent to Ukraine through a G7-guaranteed fund.
While the EU has agreed to seize profits from Russian depositories, further steps to utilize these funds have not yet been approved. There is some skepticism in Europe about the financial engineering involved in unlocking more money for Ukraine, with concerns raised about potential legal obstacles.
Despite these challenges, a significant injection of cash from Russia’s frozen assets would greatly benefit Ukraine. European politicians are urged to support these efforts before a new administration potentially changes the approach. Ultimately, leveraging the interest income on frozen Russian assets could provide a much-needed financial lifeline for Ukraine.
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