Merz Proposes Utilizing Frozen Russian Assets for Ukrainian Support

In a significant development regarding the ongoing support for Ukraine, German Chancellor Friedrich Merz has proposed a plan to leverage nearly EUR140 billion in assets frozen within the European Union, specifically those belonging to the Russian Central Bank. This initiative aims to provide Ukraine with a zero-interest loan intended to bolster its military capabilities as the country continues its defense against Russian aggression.

In a recent article published in a major financial outlet, Merz outlined that the repayment of this loan would only occur once Russia compensates Ukraine for the damages incurred during the conflict. He emphasized that this financial assistance is crucial for reinforcing Ukraine's military strength in the face of ongoing threats.

Merz asserted that the European Union has a commitment to assist Ukraine for as long as necessary, and he believes it is time to translate this political promise into a concrete financial instrument that sends a clear message of resilience to Moscow. He criticized the previous approach of merely reacting to Russia's moves and called for a proactive strategy to secure Ukraine's defense capabilities for the coming years.

Should Merz's proposal be realized, EU member states would not need to draw significantly from their national budgets for the forthcoming support required by Ukraine. Instead, they would provide guarantees to cover the potential need for the release of the frozen Russian assets, should circumstances change. This plan would allow for a more sustainable financial framework for Ukraine's defense.

Merz highlighted the importance of establishing national budget guarantees that could eventually be backed by the EU's multiannual financial framework, once the new budget becomes available in 2028. The mobilization of these funds is seen as essential to ensuring Ukraine's military resilience over the long term.

The Chancellor expressed urgency in addressing what he described as a "cynical game of time" played by the Russian President, asserting that a new impetus is needed to alter Russia's calculations. He emphasized the necessity of taking decisive actions rather than merely responding to Russia's agenda.

In addition to providing military support, Merz aims to instill hope in the Ukrainian people and send a strong message to the United States about the importance of collaborative efforts towards achieving a just and lasting peace.

Discussions surrounding the use of frozen Russian assets for Ukraine's military support have been ongoing for several months, with estimates suggesting that around EUR200 billion in assets are currently held in Belgium by Euroclear, a financial institution.

Despite the potential benefits, many EU member states remain skeptical about directly using the Russian Central Bank's funds due to legal concerns, potential risks to Europe's financial stability, and fears of retaliation from Moscow. The Russian government had previously cautioned the EU against confiscating the assets of the state or its citizens.

In light of these challenges, alternative strategies for utilizing the frozen assets are being explored. European Commission President Ursula von der Leyen recently advocated for a solution that would allow for reparations to Ukraine based on the liquid portions of the frozen assets while leaving the principal assets intact.

Merz's initiative is viewed as being in Germany's national interest, especially as the country has been taking on a significant share of the financial burden in supporting Ukraine. The German government has assessed that it has surpassed the United States as the primary supporter of Ukraine, while other major European nations like France and the UK have contributed less. This has led to concerns in Berlin about the sustainability of its financial support amid rising domestic pressures.

Finance Minister Lars Klingbeil echoed the Chancellor's sentiments, asserting the need for maximum pressure on Russia to end its aggressive actions against Ukraine. He stressed the importance of not only maintaining Ukraine's defense but also ensuring that Russia is held accountable for the destruction caused by the war.