Use profits from frozen Russian assets to arm Ukraine, says Ursula von der Leyen

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Ursula von der Leyen said windfall profits from Russian frozen assets should be used to buy weapons for Ukraine as discussions intensified between European allies about how to continue supporting the war-torn country.

The proposal is the latest idea about how to use the roughly €300bn in Russian sovereign assets frozen by G7 allies in response to Moscow’s full-scale invasion of Ukraine two years ago, amid a lack of consensus over the legality of using the funds and the most appropriate way to do so.

“It is time to start a conversation about using the windfall profits of frozen Russian assets to jointly purchase military equipment for Ukraine,” the European Commission president said in a speech to EU lawmakers on Wednesday.

“There could be no stronger symbol and no greater use for that money to make Ukraine and all of Europe a safer place to live,” she added.

Her statement is the first time the EU has linked the use of frozen Russian sovereign assets to potential weapons procurement and comes amid growing friction between western allies about how to support Ukraine.

A Franco-German spat broke out on Tuesday after French President Emmanuel Macron suggested that deploying western troops to Ukraine could not be ruled out, but Berlin told Paris to instead “supply more weapons” for Kyiv.

Discussions over an EU fund used to reimburse governments that supply weapons to Ukraine are also stuck due to disagreements over the rules governing the facility, with France restating its position that EU money should be used to purchase weapons made in the bloc.

In parallel, EU countries have been seeking to raise €1.5bn to buy foreign-made weapons for Ukraine under a Czech Republic-led fallback plan.

The situation is becoming more urgent as Ukraine warns its allies that it is running perilously low on ammunition. Kyiv has said it particularly needs long-range weapons to damage Russia’s military logistics.

“The threat of war may not be imminent but it is not impossible,” von der Leyen said, as she outlined plans for a European Defence Industrial Strategy that would include proposals for joint procurement of weapons for EU countries, a model the bloc has already used for buying Covid-19 vaccines and natural gas after Russia cut exports to the bloc.

The US has been pushing its G7 allies to confiscate about €300bn of frozen Russian sovereign assets, the majority of which are held in Belgium. But EU countries remain concerned about the risk of retaliatory measures by Moscow.

The EU has focused on profits arising from €191bn of Russian state assets that are accumulating as securities reach maturity and Belgian central security depository Euroclear reinvests them. Last month member countries agreed to set these profits aside in a separate escrow account as a first step towards allocating them to Ukraine. The commission estimates this could generate about €3bn a year, depending on interest rates.

But doubts persist on the confiscation of profits, with countries including France, Germany and Italy urging caution. Unanimity from the EU’s 27 member states is required to decide on the use of these windfall profits.

Since announcing her intention to run for a second term at the helm of the EU executive, von der Leyen has made defence a central part of her re-election campaign.

She said on Wednesday that she was “personally supportive” of appointing a defence commissioner in the next mandate.

Von der Leyen also welcomed a pledge by the European Investment Bank to do more on defence investments, and invited “our public and private lenders to support our defence industry and in particular [small and medium companies]”.