EU ambassadors struck a political deal on Wednesday (8 May) on using windfall profits from Russian frozen assets to buy weapons for Ukraine.

The plan has been in the making since Kyiv’s backers decided to freeze hundreds of billions of euros worth of assets in response to Russia’s invasion of Ukraine in 2022 but EU countries had been cautiously waiting for legal certainty from the EU’s institutions on how these assets can be used.

Under the agreed scheme, the bloc will be able to use windfall profits from immobilised Russian assets, worth up to €3 billion per year, currently stuck in the Belgium-based clearing house Euroclear and other European depositories, primarily to finance the joint purchase of weapons for Ukraine.

In the previous weeks, several EU member states had objected to the fact that the proceeds are subject to a 25% tax under existing Belgian fiscal rules, which was one of the last stumbling blocks to a deal.

Wednesday’s move was made possible by an eleventh-hour compromise whereby Belgium said it would be ready, from 2025 onwards, to channel the tax revenue from the proceeds into a common fund for Ukraine, EU diplomats said.

In addition, Brussels also reduced the fee that Euroclear will charge for handling the frozen Russian assets to 0.3% from initially discussed 0,5% after a push from Germany and France, EU diplomats said.

Additionally, the European Central Bank (ECB) would get a role in the management of the emergency buffer created with the fee to pay for lawyers in case of Russian litigation.

As a next step, EU finance ministers could rubber stamp the deal at their gathering next Tuesday (14 May).

In a separate initiative, G7 leaders meeting at a summit in June are expected to discuss a US-led push that would allow a group of countries to provide up to $50 billion in assistance to Ukraine, with a major part of the aid being repaid with the windfall profits from frozen Russian assets immobilised globally.

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