Ukraine updates: US pushing Kyiv to withdraw from Donetsk

European Union countries lifted a key hurdle to using Russian assets to rebuild Ukraine by agreeing on a procedure to keep the funds frozen as long as needed without having to vote to renew every six months. Denmark, which holds the bloc’s rotating presidency, made the announcement.

The move, which would pave the way for Ukraine to use the money, is based on Article 122 of the EU Treaty, which allows for exceptional measures in cases of emergencies facing the bloc. The last time it was used was during COVID-19 to enable the production of vaccines.

The European Commission is hoping to use some €200 billion ($232 billion) of Russian central bank assets, which were frozen in the EU following Moscow’s 2022 invasion of Ukraine. EU members hope these funds can provide much-needed funding beyond the end of this year to Ukraine.

But the loan plan faces strong resistance from Belgium, where the bulk of frozen assets are held. Belgium-based Euroclear, the entity that is holding most of the funds, fears legal or financial retribution from Moscow if it doesn’t have money for depositors should sanctions be lifted.

The European Commission has assured Euroclear that under the scheme, it is certain that it could repay Russia the money if necessary. Under the plan, Euroclear would lend the money to the EU, which in turn would lend it to Ukraine.

Ukraine would pay back the money if Russia compensated it for the destruction it has caused.

Not everyone in the EU was cheering: Hungary’s EU mission criticized the move, calling it an “unprecedented decision to extend sanctions on an incorrect legal basis in order to circumvent unanimous decision-making.”

The proposal’s next step is to receive approval from EU finance ministers at a meeting set for Friday.