In a controversial and potentially precedent-setting move, the European Union is reportedly preparing to funnel billions in profits from frozen Russian sovereign assets into high-yield investment schemes to bolster Ukraine’s wartime economy. The proposal, revealed by Politico on June 19, signals a growing sense of urgency within the bloc to sustain financial support for Kyiv amid waning US aid, growing domestic budgetary constraints, and internal political challenges. But the strategy also marks a notable gamble – one that could test the limits of international law, investor confidence, and EU unity.

Following Russia’s invasion of Ukraine in February 2022, Western powers imposed a sweeping package of sanctions targeting Russian banks, companies, and state institutions. Chief among these measures was the freezing of approximately $300 billion in Russian central bank reserves, of which around $210 billion is held by the Brussels-based clearinghouse Euroclear.

Though the principal of these funds remains untouched to avoid violating sovereign immunity norms under international law, the interest generated – largely from Western government bonds – has been accumulating. Last year, €1.55 billion (about $1.78 billion) in profits was diverted to Ukraine as part of a broader Western strategy to support Kyiv’s war effort without breaching legal constraints surrounding outright asset seizure.

Now, as Western resolve begins to fray under the weight of political fatigue and economic pressures, EU officials are looking for ways to “maximize” the use of these profits. According to Politico, the European Commission is floating a plan to invest this money in an EU-managed fund capable of pursuing “riskier” financial........

© Blitz