EU wants to rebuild Ukraine with Russian money, but plan is complex


The European Union plans to increase its efforts to be able to finance the reconstruction of Ukraine using frozen Russian assets, a Ukrainian demand that has been debated since last year, but is legally complex and ineffective from a financial point of view.

At a summit between the European bloc and Ukraine, this Friday (3), in Kiev, the EU also stated that it reiterates its support for the entry of the country from the east of the continent into the group.

“The EU will step up work to use Russia’s frozen assets to support Ukraine’s reconstruction and reparation purposes, in line with EU and international law,” said European Council President Charles Michel and EU President European Commission, Ursula von der Leyen, in a joint statement at the event.

The intention, however, was not detailed in the document. There is also no information about the necessary procedures for such an operation, both for State resources blocked from the Russian central bank and private assets of oligarchs, or what is the legal viability for this, something that limits European advances in this regard.

In the case of private assets, although the bloc has a legal basis to freeze them under the Lisbon Treaty (which reformed the EU in 2009), it cannot seize or confiscate private assets unless they are the result of criminal activity —the mere association with the Russian state and with Putin, the cause of most of the sanctions, would not be adequate.

In addition, several countries in the group have bilateral investment pacts with Moscow, which protect current private assets even if the agreements are broken, according to the think tank Center for European Reform, which also points to the need for constitutional changes in nations such as Germany for funds to be directed to Kiev.

From the point of view of the assets of the Russian central bank, according to the think tank, the path would be more easily seen as legitimate. First, because there is precedent, although in a different situation, as in the case of the confiscation of foreign currency reserves in Iraq by the United States, directed towards the reconstruction of the country in the Middle East after the defeat of Saddam Hussein, in 2003.

An eventual understanding by the International Court of Justice that Russia should repair Ukraine for the war would also contribute. Refusal to pay compensation could be used as an argument for confiscation and would bring it closer to legality.

Even in these cases, the measure is politically sensitive and could have serious implications from an economic point of view. On the one hand, the European Union would open a gap for other countries to do the same, including with European assets allocated outside the continent. On the other hand, it could indicate to the international community the bloc’s disrespect for international laws.

The discussion also takes place in the United States, where authorities have been very cautious in suggesting the confiscation of Russian resources. Discouraging other countries from keeping their reserves in dollars and in American institutions and even the illegality of the measure under the country’s laws are among the possible consequences indicated of an eventual seizure of these assets.

Another problem suggested by the European think tank is less complex and more objective: the value of the total resources confiscated (by the EU and the United States), even if applied, would fall short of the estimated need to repair Ukraine.

Estimates from the end of last year made by the European Union indicate that the damage caused to Ukraine reached €600 billion at the time, while the amount of frozen resources is €319 billion (300 billion from the Russian State, 19 billion from oligarchs allied with the President Vladimir Putin), just over half of the required amount.

This Friday (3), Washington announced an additional US$ 2.2 billion in military aid to Kiev. The new package includes the GLSDB (small-diameter ground-delivered bomb), a new weapon developed by US Boeing and Sweden’s Saab that expands the range of Ukrainian weapons to regions of the country illegally annexed by Russia, including Crimea. .

France and Italy also announced the deployment of medium-range SAMP/T air defense systems, which can track several targets at once and shoot down ten at once, according to Reuters news agency.

The visit by European authorities to Kiev and the organized summit reflect how the bloc has deepened its involvement in the conflict in recent days, although it is still reticent in some cases such as the confiscation of assets.

By the one year anniversary of the war, on the 24th, a new package of sanctions against Moscow must be detailed and put into practice. Last week Germany announced the sending of tanks to Kiev and authorized other countries that operate their armored vehicles to do the same.

This Thursday (2), President Luiz Inácio Lula da Silva (PT) commented on the role of European leaders in the conflict and stated that “even unintentionally”, the European Union is “inside the war”. The Brazilian representative also spoke again about his proposal to create a forum of neutral countries to mediate the conflict and negotiate a peace agreement.

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