Generating 'Secondary Revenue' through Russian Frozen Asset Management
Annual Scale of 2.5 to 3 Billion Euros
Requires Consent from 27 Member States
The European Union (EU) announced on the 20th (local time) plans to use the operating profits from frozen Russian assets for Ukraine's military fund.
The EU Commission and Josep Borrell, the EU High Representative for Foreign Affairs and Security Policy, officially proposed to the Council representing the 27 member states to utilize the annual operating profits from frozen assets, amounting to 2.5 to 3 billion euros (approximately 3.6 trillion to 4.4 trillion KRW), as support funds for Ukraine.
The profits mentioned by the Commission refer to the "secondary profits" generated during the management of frozen Russian central bank assets by the EU Central Securities Depository (CSD). Currently, most of the 210 billion euros (about 305 trillion KRW) worth of Russian assets frozen within the EU are held and managed by Euroclear, a depository institution located in Belgium. The secondary profits are unexpected gains obtained during the reinvestment process of these frozen funds by Euroclear. The EU describes this as "windfall income."
The EU plans to transfer about 90% of the nearly 3 billion euros in annual operating profits to the "European Peace Facility" (EPF) to be used for purchasing weapons for Ukraine. The remaining 10% will be used for Ukraine's recovery and reconstruction costs. Some funds will also be reserved for legal preparations and operational expenses related to lawsuits against Russia.
A senior EU official told reporters on the same day, "If the approval process proceeds swiftly, the first transfer of profits could be possible in July." He added, "Since we are dealing with operating profits earned by the European Central Securities Depository, the Russian central bank has no rights to this money," and asserted, "We expect no issues under international law regarding this proposal."
Earlier, the EU introduced regulations last month requiring all central securities depositories within the region holding Russian assets exceeding 1 million euros (about 1.4 billion KRW) to manage profits separately from the principal in distinct accounts. The current proposal applies only to profits generated after the introduction of the new regulations, not to interest accrued since 2022, and is therefore considered unproblematic.
However, for this plan to be realized, the consent of all 27 member states is required. Countries such as Hungary oppose military support for Ukraine, and there are views that the legal basis is unclear, making consensus difficult to achieve. Related discussions are expected to intensify at the EU summit on the 21st.
Russia immediately opposed the plan, calling it an "unprecedented violation of international law." A spokesperson for the Russian Foreign Ministry warned that the EU's plan is "direct plunder and theft," and threatened a stern response if the plan is enforced.
Ukrainian Prime Minister Denys Shmyhal stated at a press conference, "Frozen Russian assets should be fully confiscated or transferred for other uses," adding, "We must set an effective precedent that forces the aggressor to pay a huge price for the destruction they caused."
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