The European Commission on Friday (13 September) presented member states with options for extending the timeframe of the bloc’s sanction regime against Russia to unblock a Russian frozen assets deal for Ukraine. However, an agreement on the matter looks far off.
In June, G7 leaders struck a provisional political deal to collectively frontload $50 billion in funding to Ukraine – EU and US to provide $20 billion respectively, with the UK, Canada and Japan providing together $10 billion – which are to be backed by future windfall profits from Russian frozen assets.
Around €200 billion of Russian state assets have been frozen across the EU since Russia invaded Ukraine in 2022, of which 90% rests in Belgium, where international clearinghouse Euroclear is headquartered.
To fully secure the deal, Washington has requested European allies to provide guarantees that the assets would remain, in fact, frozen until there is clarity about Russia paying reparations.
For that, the bloc would need to make sure that its Russia sanctions regime, currently renewed every six months by unanimity of all member states, has a longer shelf life.
The European Commission presented three options to EU ambassadors on Friday that would extend the sanctions period, confirmed EU diplomats.
One option would be to foresee freezing Russian central bank assets for five years but to be reviewed every 12 months. It would require a qualified majority of member states to decide whether to unfreeze them.
A second option would be to see a renewal of the freeze every 36 months with unanimity, while the rollover of the rest of sectoral sanctions would remain at six months.
A third option would be to see all Russia sanctions get a 36-month rollover.
According to EU diplomats, all three options are seen to likely be acceptable to the US.
A majority of the EU ambassadors during Friday’s meeting were open to the options proposed.
While there was no specific feedback expected from member states, several countries have also expressed reservations.
Belgium has asked to be mindful of the potential risk of claims and liability for Euroclear, a position that several EU member states, including Luxembourg and Netherlands, have backed.
France, meanwhile, has argued that part of the funding for Ukraine should be earmarked for military spending, including restrictions to benefit spending on EU industry.
While EU diplomats and officials familiar with the matter believe those reservations are likely to be resolved, the main obstacle, however, remains Hungary.
Budapest is likely to argue that a decision on sanctions extension will need to be handled directly by EU leaders rather than the bloc’s envoys.
A discussion on the matter could likely be put on the agenda when EU leaders meet in mid-October for their regular summit in Brussels.
EU diplomats and officials are adamant the deal would need to happen before the US November elections, to avoid potential uncertainty that could arise from former US president Donald Trump potentially returning to the White House.
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