Europe is inching closer to using profits from frozen Russian central bank assets to finance Ukraine’s reconstruction. While this is not exactly the same thing as using the assets themselves for that purpose, it is a viable approximation, and dovetails with similar moves at Washington. 

The new law adopted by the European Union on Monday was formulated along parameters outlined by the G7 and establishes a legislative track by which profits generated by confiscated Russian assets can eventually find their way toward Ukraine via the EU budget.

Both the EU and the G7 froze more than $300 billion of Russian central bank assets following Russia’s invasion of Ukraine almost two years ago, but until now they have waffled on how the funds can actually be used.

Russia, unsurprisingly, greeted the news with a mix of glumness and vitriol. The Russian foreign ministry spokeswoman, Maria Zakharova, told Sputnik radio that “this is theft: It’s the appropriation of something that doesn’t belong to you.”

Ms. Zakharova’s  interlocutor failed to remind her that Ukraine doesn’t belong to Russia and that President Putin’s invasion would be considered by most rational thinking people to be tantamount to theft. 

The ever expressive Ms. Zakharova went on to say that considering that Russia “has qualified this as theft, the attitude will be as toward thieves” and warned of an unspecified “extremely tough” response.  

That response could include Russia’s seizing of Western assets, but it was not immediately clear what their total value is. Most American and European companies divested from Russia in the months following the invasion of Ukraine. 

In the meantime, as is usually the case with anything that starts at Brussels, the process of unfreezing the assets is likely to be a long thaw. Right now, about two-thirds of  the funds in question are parked inside the EU, with the majority held by a Belgian clearing house called Euroclear. 

The new law means that central securities depositories like Euroclear will be prohibited from using net profits and instead must keep revenues from the Russian assets separate and stored until EU member states unanimously decide to set up a mechanism for them to be used.

The European Commission would then be expected to transfer the money to the EU budget — and subsequently to Ukraine.

In a statement, the Council of the EU said, “This decision paves the way for the Council to decide on a possible establishment of a financial contribution to the EU budget raised on these net profits to support Ukraine and its recovery and reconstruction at a later stage.”

This could generate more than $18 billion for Ukraine over the course of four years.

Ukraine’s foreign minister, Dmytro Kuleba, said on X that he “welcome the European Council’s decision paving the way for the use of extraordinary revenues from the frozen Russian assets.” 

He hinted that he would like to see further concrete steps taken: “Ukraine is ready to continue working with partners on reaching our ultimate goal: making Russian assets available to Ukraine. The aggressor must pay.” 

Washington has previously floated the idea of confiscating Russian sovereign assets outright, but the EU sees that as being too risky legally. The European Central Bank has raised concerns over the potential adverse consequences that would have for the euro. In addition to that, the theoretical precedent it would set could signal to investors that they could pull out of euro assets due to concern their money might one day be seized, too.

As the Sun has reported, the Senate Foreign Relations Committee recently passed the Rebuilding Economic Prosperity and Opportunity for Ukrainians Act, which aims to make Russia pay to rebuild Ukraine. 

While the REPO Act is likely to come to fruition faster than the EU’s new law, in tandem the legal maneuverings will form a formidable barrage of arrows aimed at the Kremlin ramparts. For now, more attention is focused on the $95.3 billion aid package for Ukraine, Israel, and Taiwan that the Senate passed early on Tuesday.

Yet even if the hotly contested aid package clears hurdles in the House, Ukraine will still need north of $400 billion to rebuild. That is separate from the money that it needs to keep up the fight against a belligerent Russia, nearly two years after the full-scale invasion began.