EU to discuss €3bn plan on Russian frozen funds; Pentagon to send $300m in weapons to Kyiv

13 Mar 2024

A European Union plan to use the profits generated from frozen Russian central bank assets will face resistance next week when the bloc’s leaders discuss the controversial proposal.

The White House announced a package of $300m in military assistance to Ukraine, the Biden administration’s latest effort to secure aid for Kyiv as Congress remains deadlocked.

European Union leaders will next week call for new sanctions targeting Belarus, North Korea and Iran over their role in helping Russia conduct its war against Ukraine.

Russia faced a wave of Ukrainian drone attacks, including against oil refineries and reported fierce fighting with insurgents who’d crossed the border vowing to take the war to President Vladimir Putin.

EU plan to use €3bn of Russian funds faces test next week

A European Union plan to use the profits generated from frozen Russian central bank assets will face resistance next week when the bloc’s leaders discuss the controversial proposal.

Some member states are cautious about the plan, particularly a last-minute idea to use the proceeds to buy weapons for Ukraine’s military, according to people familiar with discussions on the proposal.

The European Commission, the EU’s executive arm, is expected to put forward a blueprint as early as March 15 on the next steps in transferring the profits to the bloc’s budget. That plan will be discussed at a summit in Brussels on 21-22 March, according to a draft of the conclusions seen by Bloomberg.

Western nations have frozen about €260-billion in securities and cash, more than two-thirds of it in the European Union. The EU expects to generate around €3-billion per year from these frozen assets, other people said, who spoke on the condition of anonymity.

“We have the legal clarity and conditions to allow the use of these revenues to support Ukraine,” EU trade chief Valdis Dombrovskis said on Tuesday. “We are fully committed to moving forward with the next step: to allow redirecting these revenues to the EU budget for the benefit of Ukraine.”

Countries including Ireland, Malta and Luxembourg have said the plan — in particular, the intention to use the funds to purchase weapons — deserved a more thorough analysis, said the people. Hungary stressed that the revenue should be allocated to Ukraine’s reconstruction.

European Commission President Ursula von der Leyen first proposed the idea of using the funds to purchase military equipment last month. The commission then discussed the proposal with member states last week, according to the people.

Most of the Russian central bank assets are held in Euroclear, a Brussels-based clearing house that invests that money which may earn as much as €15-billion to €20-billion until 2027, one of the people said. Belgium applies a 25% corporate tax to the profit, which may earn €1.7billion this year.

Western allies generally agree that the frozen Russian funds should remain off-limits to Moscow unless it pledges to help with Ukraine’s reconstruction. But they’re at odds over whether it’s lawful to seize the assets outright — so the challenge for the EU is to squeeze funds out without depleting them.

France and Germany, along with the European Central Bank, have expressed the most caution. They worry about Russian retaliation targeting European assets there, and also the impact on financial stability and the euro’s status as a reserve currency, Bloomberg reported earlier.

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Pentagon to use stopgap funds for weapons to Ukraine

The White House announced a package of $300-million in military assistance to Ukraine, the Biden administration’s latest effort to secure aid for Kyiv as Congress remains deadlocked.

National Security Advisor Jake Sullivan said the assistance would aid Ukrainian troops, who were being forced to “ration” their ammunition with the war against Russia now in its third year.

“We’re already seeing the effects on the battlefield,” Sullivan said on Tuesday at the White House, calling it assistance Ukraine “desperately needs” to hold the line against Russia.

The newest Ukraine security assistance package will include anti-armour and anti-aircraft weapons as well as artillery rounds, according to senior defence officials who spoke on condition of anonymity to detail the funding. The equipment announced as part of the latest aid package could arrive in Ukraine within days, according to the officials.

The Pentagon is able to fulfil the presidential drawdown package because of contract savings on weapons bought to replenish those sent to Ukraine from existing stocks, the defence officials said. The US Army, in particular, was able to negotiate better contracts and prices for 155mm ammunition, Humvees and Joint Light Tactical Vehicles, one of the senior officials said.

Even though the new drawdown package is coming together from cost savings, it doesn’t change the $10-billion deficit the Pentagon is experiencing in its funding to restock weapons sent to Ukraine, according to the defence officials. The Pentagon hasn’t received any additional funding for Ukraine in 15 months, a senior defence official said.

“We’re able to use these cost savings to make this modest amount of new security assistance available right now without impacting US military readiness,” Sullivan said. But he added it was urgent for Congress to approve further assistance.

“This ammunition will keep Ukraine’s guns firing for a period, but only a short period. It is nowhere near enough to meet Ukraine’s battlefield needs,” Sullivan said.

Republican lawmakers have failed to act on President Joe Biden’s request for additional Ukraine aid, seeking to use the funds as leverage to extract concessions on US immigration policy. The Senate has passed a $95-billion package that includes aid for Ukraine, and Israel in its war against Hamas, as well as Taiwan but House Republicans are refusing to bring it to a vote.

Putin voices support for Opec+ oil cuts, but warns of risks

Russia’s oil-production cuts made in cooperation with Opec partners have supported the nation’s revenue, yet may result in a loss of the market share, President Vladimir Putin said.

“Opec+ does help us hold up the oil price and ensure budget revenue,” Putin said at the meeting with winners of a governmental competition on Tuesday that was shown on Rossiya 24 state TV. “Yet the output is dropping while it grows in other countries such as the US, and we may lose markets.”

Putin emphasised that Russia’s cooperation with Opec+ had his full support, and said he was noting the risk of losing market share only to express “an alternative point of view”.

Russia’s oil and gas industry provides a key source of state funds, which have been under pressure from the rising military cost of Moscow’s invasion of Ukraine. In retaliation for the invasion, Western countries imposed several waves of sanctions, including a cap on the price of the nation’s petroleum exports, aimed at curbing Moscow’s revenue without disrupting Russian oil flows into the global market.

Russia, together with Saudi Arabia, is a de-facto leader of the alliance between the Organisation of Petroleum Exporting Countries and several other global oil producers. Earlier this month, Opec+ nations extended their supply curbs into the second quarter, with Russia, which earlier committed to cutting both production and exports, pledging to focus more on output.

EU leaders to urge new sanctions for Belarus, North Korea, Iran

European Union leaders will next week call for new sanctions targeting Belarus, North Korea and Iran over their role in helping Russia conduct its war against Ukraine.

“Russia’s access to sensitive items and technologies with battlefield relevance must continue to be restricted,” according to draft conclusions of the March 21-22 leaders’ summit seen by Bloomberg. This includes “targeting entities in third countries enabling this illicit trade”, it said.

The EU is trying to step up support for Kyiv with the war now in its third year, and as Ukraine’s troops struggle to overcome a shortage of ammunition and personnel. The current deadlock in fighting is “shifting the momentum” in Moscow’s favour, US intelligence agencies told the Senate on Monday.

The EU approved a modest package of sanctions last month aimed at Moscow, its 13th since Russia invaded Ukraine. Those measures focused on enforcing existing restrictions.

Russia battles attacks by Ukrainian drones, rebel troops

Russia faced a wave of Ukrainian drone attacks including against oil refineries and reported fierce fighting with insurgents who’d crossed the border vowing to take the war to Putin.

Air defences intercepted 25 Ukrainian drones in seven regions including Moscow early on Tuesday, the Russian Defence Ministry said on its Telegram account. Strikes continued in several regions later on Tuesday, according to Telegram statements from local authorities.

Lukoil’s Norsi plant in the Nizhny Novgorod region halted a unit after “an incident”, its press service said on Tuesday. The statement came shortly after the region’s governor, Gleb Nikitin, disclosed on Telegram that a drone attack on the Norsi facility had resulted in a blaze. A strike near Surgutneftegas’ Kirishi refinery not far from St Petersburg didn’t cause any damage.

Separately, the Defence Ministry and the Federal Security Service said their forces fought off attempts by armed groups to cross from Ukraine into the Belgorod and Kursk regions in battles that involved tanks, artillery and aircraft fire.

They blamed “Ukrainian terrorist groups” for the assaults with tanks and armoured vehicles in the Belgorod region, claiming as many as 60 attackers were killed. Four assaults by “sabotage and reconnaissance groups” in the Kursk region were driven back with “significant losses” for the insurgents, they said.

The cross-border attacks were claimed on social media by three rebel Russian groups — the Russian Volunteer Corps, the Siberian Battalion and the Legion of Freedom — that are fighting on the side of Ukraine and have declared their intention to overthrow Putin’s regime by extending the war onto his territory.

Poland joins Czech-led ammunition initiative for Ukraine

Poland joined a Czech-led initiative to buy hundreds of thousands of artillery rounds for Ukraine with a “substantial” financial contribution, Foreign Minister Radoslaw Sikorski said.

“Yes, we are in,” Sikorski told a breakfast in Washington hosted by the Christian Science Monitor on Tuesday. He declined to say how much his government would contribute.

Poland’s move would align it with countries including Germany, France and Canada in the plan that entails the Czech Republic serving as the middleman to link governments willing to finance the purchase of ammunition from outside the European Union.

Czech Prime Minister Petr Fiala said last week his government had received enough money from Ukraine’s allies to buy 300,000 shells and planned to deliver “much more.”

Kyiv is estimated to need at least 200,000 rounds a month to keep up the fight against Russia’s invading forces, whose average daily shell use can be anywhere from three to five times what Ukrainian forces can fire. The Czech plan aims to deliver about 800,000 shells. DM

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