Taxing extra profits from frozen Russian assets, EU seeking agreement before extraordinary summit

Brussels – An agreement on the use of extra profits from Russian assets frozen in the EU before the extraordinary EU summit on February 1: This is what Belgium’s six-month presidency at the helm of the EU is aiming for, which, according to reports in Brussels, will work in the coming days on new compromise texts that could be approved in COREPER (the Committee of Permanent Representatives to the EU) next week.

The first real discussion of the European Commission’s proposal was held yesterday (Jan. 24) at COREPER, following an initial meeting on Jan. 10 in which the EU executive only presented the details of its proposal to the ambassadors, without any real debate. The discussions have now moved into full swing, exactly one week away from the Extraordinary summit convened to break the deadlock on the mid-term review of the long-term budget (2021-2027).

The European Commission proposed last Dec. 12 to governments to start collecting the extra profits generated by the capital tied up in the EU and then go to rebuild Ukraine. The “how to do it” will then have to be determined at a second stage, based on what member states decide. For now, Brussels is proposing to move profits from sanctioned Russian assets in the EU into a separate account as a first, cautious, step to then go and use them to finance Ukraine’s reconstruction. In Brussels, there is talk of a phase 1, to be followed in due course by a proposal on how to use these resources in practice (the so-called phase 2). To avoid legal problems, the Commission has proposed using not the actual assets (which the European Commission has estimated at 211 billion euros), but the profits derived from just being immobilized in the EU territory, mainly held at Euroclear, in Belgium, and at Clearstream, in Luxembourg. The proposal will not be retroactive, so it cannot target the extra profits made so far, but will apply from the moment governments have found a common position on the issue and only on resources flowing from the sanctioned Russian Central Bank.