Introduction

Ukraine is reportedly looking to seize interest accrued on frozen Russian assets as it scrambles to raise more wartime funds.

Budget Deficit and Security Spending

Kyiv is facing a budget deficit of more than $40 billion for 2024, while security spending is set to increase to $45 billion.

Potential Funding Source

According to The Wall Street Journal, one source of much-needed funding could come from the Russian assets that were frozen by Western institutions soon after Moscow’s 2022 invasion.

Seizing Accrued Interest

While directly seizing the hundreds of billions of dollars in Russia’s foreign exchange reserves and gold deposits has run into legal doubts, the interest they have accrued is another matter.

Role of Clearinghouses

The interest has been sitting in clearinghouses that hold the Russian funds, such as Euroclear. In the first half of the year, the Belgium-based firm collected $1.7 billion in interest on $150 billion in Russian assets. It also incurred $22 million in costs related to the sanctions.

Talks with Euroclear and the European Union

Euroclear is in talks with the European Union to send some of that money to Ukraine by way of a windfall tax paid to the European Commission, sources told the WSJ, with one proposal allowing Euroclear to keep a portion of the funds.

Response from Euroclear

Euroclear did not immediately respond to Insider for comment and declined to comment to the WSJ.

Other Funding Sources

Meanwhile, Ukraine has also been receiving funds from Europe and the US. In addition, Kyiv has tapped its bond market, borrowing $10 billion via local sales this year as high yields of around 10% have attracted the country’s private sector.

Rebuilding Ukraine

Looking beyond the war, Ukraine needs $411 billion to rebuild itself, according to World Bank estimates.