A year ago, EU member states promised to supply the Ukrainian army with one million bullets for the defensive war against Russia. But so far the EU has only half fulfilled its promise.

On Wednesday (March 20), however, a series of economic and political measures to support Ukraine were presented in Brussels – and at least the financial aid will continue.

50 billion euros in the Ukrainian budget

The EU-Ukraine Association Council met for the first time since the EU officially announced the start of accession negotiations with Ukraine in December. This Council is responsible for preparing the next steps until the start of formal accession negotiations.

Ukrainian Prime Minister Denis Shmyhal has presented a plan for reforming and rebuilding Ukraine while the Russian invasion lasts. The president of the European Commission, Ursula von der Leyen, announced that today the first 4.5 billion euros of the European package totaling 50 billion euros were paid to Ukraine.

Until the end of 2027, the EU will co-finance Ukraine’s budget, which is “absolutely decisive for the country”, as von der Leyen emphasized in Brussels.

For his part, Prime Minister Schmihal stated that “we are particularly grateful for the support”. The €50 billion financing mechanism is key to stability. “The EU is really on the highest level of readiness because it knows that its own vital interests are also at stake,” Schmihal added.

The EU’s foreign policy chief, Josep Borrell, praised Ukraine for making rapid progress on the conditions for joining the Union, especially in wartime. The European Commission, however, refrained from mentioning any specific date for the official accession negotiations in the context of a conference of the governments of all 27 member states plus Ukraine.

For such a thing, a unanimous decision of the member states will also be needed. But Hungary has repeatedly put obstacles in Ukraine’s accession process. And EU diplomats expect the same to happen in the next step towards Ukrainian integration.

Arms funding for Ukraine through… Russia

The European Commission has also presented a plan on how the profits from the freezing of Russian assets in the EU will be used to support Ukraine.

These are interest rate profits that will reach around 3 billion euros a year and which come from assets of the Russian state bank that are in the Belgian securities depository Euroclear. These assets, amounting to around 200 billion euros, have been frozen due to EU sanctions and therefore cannot be transferred by the Russian central bank.

Profits from these Russian assets will henceforth count towards the European Peace Mechanism – through which member states fund arms deliveries to Ukraine. Member States have contributed a total of €5 billion to the Mechanism so far.

However, the European Central Bank is concerned that the use of Russian money by Euroclear could worsen the finances of the private Belgian company and therefore lead to a greater financial crisis. Thus, the Belgian company can keep a part of the profits from the Russian assets as collateral, in order to finance in this way, for example, potential claims of other investors.

The ECB also fears that Chinese banks or other large investors could take their assets from Euroclear – in a worst-case scenario the company would then have to be bailed out by the Belgian state. And this would again lead to an economic crisis in the Eurozone.

In addition, Russia could freeze Euroclear’s assets in retaliation – around €33 billion of the Belgian firm is said to be in Moscow. Under pressure from the ECB, the EU now wishes to act only in cooperation with other Western industrialized states of the G7, because the Russian state bank has – to a lesser extent – the assets of the USA, Japan and Great Britain as well.

Moscow speaks of “theft”

EU heads of state and government are discussing the plan to capitalize on Russian gains today Thursday (March 21st). Germany, which until recently seemed opposed to this model, also adopted a positive attitude.

Belgium has announced that 25% of capital taxes on Russian profits will be transferred to Ukraine. With the possible use of Russian money to finance the purchase of weapons for Ukraine, the EU is walking down an unknown path.

Until now, the freezing of foreign assets of state-owned banks was only done after the end of wars, for example after the first Gulf War of Iraq against Kuwait in 1991 or after the end of the Second World War.

Moscow’s reaction was immediate. Dmitry Peskov, a Kremlin spokesman, made it clear that the West’s reputation as a safe haven for investors had been destroyed.

“The damage is undeniable. And of course over the next several decades there will be criminal prosecutions against the individuals and states that make such decisions,” said Peskov. The representative of the Russian Ministry of Foreign Affairs spoke of “theft and robbery”.

Possible tariffs on Ukrainian agricultural products

On Wednesday night, member states agreed to extend duty-free imports of goods from Ukraine for another year. However, due to the agricultural mobilizations, certain products are to be excluded, such as honey, eggs, poultry, sugar, corn and oats. Tariffs on these products could apply again from June if imports exceed a certain amount.

Ukrainian Prime Minister Shmyhal seemed satisfied with the decisions, as Ukraine will not exceed the ceilings set for the products in question anyway. The ceiling is derived from the average prices of the years 2022 and 2023. Whether Polish farmers, who are blocking imports due to cheap Ukrainian competition, can be appeased in this way remains to be seen.