Next week the European Commission will present a decision on how to use the immobilized financial assets of the Central Bank of Russia (managed by the Belgian financial services company Euroclear) in the interests of Ukraine, so that financing can start this summer.

A high-ranking European official told reporters about this on condition of anonymity. As is known, it is in Euroclear, which specializes in transactions with securities, as well as in the storage and servicing of assets of these securities, that the assets of the Russian Central Bank worth EUR 190 billion have been immobilized. Euroclear handles EUR 90 trillion worth of securities transactions every month.

According to the official, the Commission's proposals are expected early next week; further on the procedure in the conclusions of the European Council will be the first reference to these proposals, which can be written as "The Council takes note" or "welcomes the proposal." He said they will have an agreement on this issue before the end of Belgium's chairmanship, which would allow them to receive the first tranche for Ukraine already in the summer. He added that how much it will be will depend on the proposal of the commission.

Explaining the presence of the Russian Central Bank's assets in Euroclear, the journalists' interlocutor said an account with Euroclear provided the Central Bank of Russia with a single point of access to the European and international financial markets. He said it is critical to understand: this is a single point of access, and like every participant in the Euroclear system, the Central Bank of Russia has a securities account into which all securities are invested or deposited, as well as a cash account.

The senior official said two years have passed since the European Council decided to freeze Russian assets. The sanctions have meant that the Central Bank of Russia can no longer access its cash account, as well as its securities portfolio; securities generate income, and Euroclear must invest these incomes, which it does very carefully, the official said.

The journalists' interlocutor detailed that there are three aspects regarding the frozen assets of the Russian Central Bank and their use: there are assets, there is income from assets, there is a tax on income from assets. He said the assets of the Central Bank of Russia in Euroclear in euro equivalent amount to EUR 190 billion. Euroclear is investing Russian money – this is income from assets in the amount of expected EUR 15-20 billion in the next three to four years, until 2027, the official said.

In addition to the assets of the Russian Central Bank, Euroclear also contains frozen assets of the Russian National Settlement Depository in the amount of EUR 69 billion and EUR 9 billion of the cash account, and there are assets of Russian private investors, the amount of which is a commercial secret. According to the high-ranking European official, this is about that money; the Commission's decision will concern income received from the assets of the Russian Central Bank.

The journalists' interlocutor said that on February 14, 2024, the European Commission took the first step, which was aimed at ensuring that the profits received were allocated for potential use in Ukraine. This decision came into force on February 14, and in the coming days the Commission will make a new proposal. This is the so-called second step. With this proposal, the Commission will answer two questions. First: how will the net profit be sent to Ukraine? It could be a Ukraine facility, maybe to be for military purposes is still being discussed, he explained the state of affairs.

Separately, the official touched upon the issue of tax on income from frozen assets. He said Belgium applies 25% of corporate tax, which is estimated at EUR 1.7 billion in 2024. The Belgian government has decided to defer these funds to the Ukraine facility: EUR 1.5 billion will be spent this year and the rest next year. Belgium is free to dispose of tax, should not wait for anyone, and this cannot be challenged in court. The European Commission will come up with a proposal regarding profits after taxes are paid, he also said.

Answering Interfax-Ukraine's question about how the Belgian government intends to use these funds in the interests of Ukraine, the journalists' interlocutor recalled that not long ago Belgian Prime Minister Alexander De Croo announced that EUR 200 million would be allocated to the Czech Republic's initiative to purchase ammunition for Ukraine outside the EU. He said EUR 200 million will be spent on the Czech initiative to purchase ammunition and about 300-350 million more will be allocated to the purchase of military equipment for Ukraine. There is also a decision to allocate money for the reconstruction of Ukraine – EUR 150 million will be allocated, which will be managed by the Belgian Development Agency, the funds will also be used for humanitarian aid, the official said.

Meanwhile, a high-ranking European official said the ratio of finances that will go to support Ukraine will be approximately "50 to 50" between military and other expenses. He also said these funds are not provided to Ukraine directly. If this is military assistance, equipment will be transferred, not money, and this EUR 200 million for the Czech initiative will be transferred to the Czech Ministry of Defense, which will then purchase ammunition around the world and transfer it to Ukraine. Also, quite large amounts of money go to Ukrainian refugees here, in Belgium, in the form of social benefits, he said.

The second aspect of the expected proposal from the European Commission will concern a mechanism to avoid the collapse of Euroclear. As a senior European official said Euroclear, and it is only a matter of time, will have to pay a large number of claims from the Russian side. Since Russian assets are blocked in Euroclear, as of today, more than 100 lawsuits have been filed against this company. The Russian court does not recognize the sanctions, and they are simply they will come to Euroclear, impose fines and penalties, and slowly the Russians will take away all the cash of Western financial institutions in the amount of 33 billion. This is exactly the amount that Western financial institutions previously invested in Russia, he said.

In addition, he did not rule out other possibilities to put an end to Euroclear. According to him, they will also try to take over Euroclear assets that are blocked in Dubai and Hong Kong. If the Russian court accelerates the proceedings, EUR 33 billion in Russia will be at risk, as well as Euroclear assets in Hong Kong and Dubai. And this will be the end of Euroclear, and the National bank of Belgium, which is the supervisory authority, will have to revoke the license. Then the financial system will collapse, he described a possible scenario.

In order to prevent this from happening, the European Commission must provide appropriate mechanisms, including those that will create a significant buffer. It is critical that the proposals include some kind of emergency brake that can be applied if we see that Euroclear is completely devastated by the courts with fines from the Russian side. Therefore, the Commission's proposal will be about a mechanism that will allow the National Bank of Belgium, practically, suspend the transfer of profits to the EU budget. And the buffer will be revenue from 2022-2023 and partly 2024, until February 14, which amounts to EUR 5.2 billion," the source said.

In addition, the European Commission is expected to determine how much of the profits will be used to support Ukraine and how much can be temporarily held in Euroclear. A senior official said it is important to understand that part of the money will be temporarily held in Euroclear. At the moment when the war ends, when everything is settled, the entire amount that was officially withheld will also be transferred to Ukraine. But we a significant amount of money is needed in Euroclear, he said.

Answering the question whether this proposal of the European Commission can also be applied to income received before February 14, 2024 for the previous two years, the journalists' interlocutor stated that the proposal will not have retrospective effect.

Speaking about the possibility of seizure of assets of the Russian Central Bank, the official pointed out that in international law, sovereign assets are inviolable. He said this is one of the clear rules of international law: "someone can look at them, but cannot touch them." Under international law, the seizure of sovereign assets is prohibited. In this particular case, there may be reasons not to apply this international law, and such discussions continue in the plane reparations that Russia will have to pay to Ukraine. But a country like Belgium cannot make this decision. This decision must be made by the G7, which also includes the European Union and the European Commission. If the G7 makes such a decision, Belgium will, of course, implement it. But this is a discussion that is taking place in the G7, and the G7 is not there yet, he said.