Good Money After Bad: Where Will EU Funds for Ukraine Come From?
© Sputnik / Andrey Stenin
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European Union (EU) member states have agreed on a €50 billion ($54 billion) support package for Ukraine over four years, overcoming Hungary's resistance. But where will the EU get that money?
The EU could commandeer interest paid on frozen Russian assets to fund Ukraine during its war with Moscow.
Europe's economy is facing stagnation, with zero economic growth for October-to-December period reported by EU statistics agency Eurostat.
The Eurozone inflation rate has yet to fall below the target two percent threshold, with consumer prices still remaining high.
Against that backdrop EU member states are cutting subsidies, reducing energy consumption and diminishing industrial production. Protests by farmers have rocked the continent since early January.
2 February, 12:47 GMT
Nonetheless, Brussels has found €50 billion ($54 billion) to support the embattled Kiev regime for four more years. But where will this money come from?
According to the European Council, the bloc has set up the so-called Ukraine Facility for the period 2024-2027 to "contribute to the recovery, reconstruction and modernization of the country, foster social cohesion and progressive integration into the Union, with a view to possible future Union membership."
To that end the EC has allocated €50 billion, of which:
€33 billion ($35.9 billion) comes "in the form of loans guaranteed by extending until 2027 the existing EU budget guarantee, over and above the ceilings, for financial assistance to Ukraine available until the end of 2027," the document sets out.
€17 billion ($18.5 billion) comes "in the form of non-repayable support, under a new thematic instrument the Ukraine Reserve, set up over and above the ceilings of the MFF 2021-27." The EC document specifies that revenues "could be generated under the relevant Union legal acts, concerning the use of extraordinary revenues held by private entities stemming directly from the immobilized Central Bank of Russia assets."
On February 1, CNN claimed that the EU had taken a step towards seizing billions of dollars in interest payments generated by Russian assets frozen in European accounts. Media reported that roughly €200 billion ($218 billion) remain in the EU, mainly in Euroclear, a Belgium-based financial services company.
The media outlet highlighted that the EU approved the €50 billion Ukraine package as it "came closer to finalizing a plan" of using the profits from the Russian Central Bank's sequestred assets — indicating that it has yet to gain access to the funds. Euroclear revealed on Thursday that the frozen Russian assets had yielded €5.2 billion ($5.6 billion) in interest on income assets since 2022.
On Monday, EU member states "agreed in principle" that profits from the Russian assets will be set aside and not be paid out as dividends to shareholders until the bloc's members decide to set up a "financial contribution to the [EU] budget that shall be raised on these net profits to support Ukraine", according to a draft document quoted by Euroactive.
1 February, 10:26 GMT
The document claimed that the levy will be "consistent with applicable contractual obligations, and in accordance with [EU] and international law." After that the EC would transfer the money to the EU's accounts and then to Ukraine, the media noted, specifying that the proposal targets future profits and would not be applied retrospectively. It is believed that Russia's frozen assets in the EU could generate an estimated €15-17 billion over four years, which would be transferred to Ukraine, according to the press.
Speaking to Sputnik last October, Jacques Sapir, director of studies at the School for Advanced Studies in the Social Sciences (EHESS) in Paris, argued that any attempt by the EU to grab Russia's frozen assets or revenues from them could turn into a legal nightmare for the EU leadership and particular member states where the money is being stored.
"As a matter of fact, if assets belong to the Russian state legally, you will have to prove that this state is a 'failing state,' something impossible," Sapir told Sputnik on October 29, 2023. "If assets belong to private persons, you need a legal conviction against these persons. If you can’t do both and that you take away revenues to divert them to a third party (Ukraine) this is no less than a theft. Then you will be liable to legal action. But, what is even more important, you will probably discourage all foreign investors from investing in the EU."
Brussels Wants European Farmers to Tighten Belts
While allocating tens of billions of euros for Ukraine, Brussels has yet to solve its farming crisis caused by inflation, a spike in production costs, economic slowdown, politically-motivated decoupling from Russia's energy market, an influx of cheap agricultural goods from Ukraine and the bloc's aggressive climate policies.
Farmers' protests have been gaining pace since early January, engulfing France, Belgium, Germany, Italy, Poland, Romania and the Netherlands.
Commenting on the provision of €50 billion to Kiev, French member of the European Parliament Thierry Mariani warned that the package could cost France at least €8 billion ($8.7 billion) in taxpayers' money since Paris contributes 16 percent of the EU budget.
"Another €50 billion for Ukraine (17 in donations plus 33 in loans... which will never be repaid). Do the French realize that they will have to pay €8 billion since we contribute 16 percent of the EU spending? Eight billion that our farmers would dream of," Mariani posted on X on Thursday.
By January 31, the number of farmers protesting across France against the Macron government's agricultural policies had reached 10,000, French Interior Minister Gerald Darmanin admitted. French farmers are protesting against unfair competition from cheaper imports, draconian environmental rules and the government's push to bring down food inflation by artificially suppressing prices.
In a bid to calm the protests, the French government has proposed €150 million in tax and social support — small change compared to the multi-billion aid for Ukraine paid for by Paris.
1 February, 02:06 GMT
Will EU Money be Spent Appropriately or Wasted in Ukraine?
Aid to Ukraine would be provided under certain conditions, the European Council said.
"A precondition for the support for Ukraine under the Facility shall be that Ukraine continues to uphold and respect effective democratic mechanisms, including a multi-party parliamentary system, and the rule of law, and to guarantee respect for human rights, including the rights of persons belonging to minorities. In implementing the Facility, the Commission and Ukraine shall take all the appropriate measures to protect the financial interests of the Union, in particular regarding the prevention, detection and correction of fraud, corruption, conflicts of interests and irregularities," the document read.
Those rules have already been broken Ukrainian President Volodymyr Zelensky, who has refused to hold general elections this year under the pretext of the ongoing conflict, despite top US and EU officials repeatedly urging Kiev to go ahead with the vote.
Washington and its European allies have grown concerned by Ukraine's endemic corruption, as Pulitzer Prize-winning investigative journalist Seymour Hersh remarked in his latest op-ed on Substack. Washington and Western Europe want Zelensky to carry out financial reforms.
"According to the knowledgeable American official, the first step of the new concept is a long-standing issue: financial reform," Hersh wrote. "Zelensky must be told: 'You've got to get rid of corruption before we do anything more.' The second step is something that does not exist today in Ukraine: a serious audit of all government funding. The official said Zelensky should consider the billions he needs 'as our money, as an investment with all of the rules' for its disbursement 'to be laid out and followed'."
The investigative journalist recalled that last year CIA Director William Burns secretly travelled to Kiev to warn the Ukrainian president that Washington was aware of his and his entourage's corruption. Hersh noted that Burns reportedly also told Joe Biden that Zelensky's subordinates were outraged by their leader personally taking too large a cut of the US aid.
In order to get Ukraine's spending under control, "the Council will play a key role in the governance of the Ukraine Facility," according to the EC press release.
"In this sense, a Council Implementing Decision shall be adopted by a qualified majority for the adoption and amendments of the Ukraine Plan and for the approval and the suspension of payments based on the relevant assessments and proposals by the Commission. On the basis of the Commission annual report on the implementation of the Ukraine Facility, the European Council will hold a debate each year on the implementation of the Facility with a view to providing guidance. If needed, in two years the European Council will invite the Commission to make a proposal for review in the context of the new Multiannual Financial Framework (MFF)."
Time will tell whether the EU's funds allocated for Ukraine at a time of economic stagnation and looming crisis would be used by the Kiev regime properly — or whether it will result in yet another economic and military failure.
2 February, 08:54 GMT
