The EU is considering imposing a levy on interest made from frozen Russian cash that could raise about €3bn a year to help Ukraine’s recovery from the war.
A “windfall contribution” will be discussed by EU leaders at a European Council summit on Thursday and Friday in an attempt to harness the value of sovereign Russian funds immobilised by sanctions.
The idea was mooted in the past three weeks after Germany objected to a more aggressive option involving the management of assets that range from luxury yachts to shares, artworks and Russian sovereign funds.
“The aim of sanctions is to change behaviour, not to punish,” said one diplomat. “You can’t just put the money into your own coffers. Sanctions are a judicial construction that respects the rule of law.”
It is understood that the windfall levy has been deemed legally safe by lawyers advising the EU, but further discussions with partners, including the US, Japan and the UK, will take place before it receives the green light.
The EU is holding Russian assets worth about €200bn, of which €100bn is cash from Moscow’s foreign reserves that earns about €3bn in interest a year. That would form only a fraction of the $411bn cost of rebuilding Ukraine estimated by the World Bank.
EU leaders are keen to see Moscow pay a share of the reconstruction of Ukraine when the war is over, and some in the EU believe the move will merely be a first step.
The sovereign funds are in the temporary ownership of Euroclear, the EU clearing house in Brussels, where interest is taxed at 20%, with the treasury receipts going to Ukraine. A further levy of about 3% could raise another €3bn.
“The pressure to do something is immense; we cannot wait any longer,” said one diplomat, adding that more work must be done to ensure the legality of such a move.
Also on the agenda at the summit is the establishment of an international tribunal to allow Russian leaders to be put on trial.
The international criminal court can try the perpetrators themselves, but not the ministers who helped plot the invasion of Ukraine, which is considered a crime of aggression.
One suggestion is an international tribunal run under the aegis of the UN, which Ukraine feels would “create a clear legal pathway” for cases against Russian leaders.
Migration is expected to be among the more contentious issues at the summit.
Although a council of interior ministers agreed on new proposals to stem migration and accelerate the processing of asylum seekers in Luxembourg earlier this month, Hungary and Poland objected to the issuing of “fines” if they refused to take an allocation of migrants each year.
They are hoping to reopen the debate, claiming that the Luxembourg pact should have required unanimous, not majority, support.
Eight member states, including Denmark, Greece, Austria and Malta, have written to the leaders demanding that “innovative solutions” be found.
Although they did not elaborate on the solutions, sources say some are being inspired by the UK’s decision to send migrants arriving by irregular means to Rwanda.
But since most of the 27 member states are determined to pursue the Luxembourg pact, this is more likely to cause “indigestion at dinner” than any change in the draft legislation, said one source.
