European Commission President, Ursula von der Leyen has announced the transfer of 1.5 billion euros in proceeds from frozen Russian assets in military and financial assistance to Ukraine.
It is the first tranche of money generated from profits on frozen Russian assets.
“The EU stands with Ukraine,” European Commission president Ursula von der Leyen said in a statement.
“There is no better symbol or use for the Kremlin’s money than to make Ukraine and all of Europe a safer place to live.”
Ursula von der Leyen
The European Commission (EC) said later in the day that this windfall profits from frozen Russian assets was provided to the European Commission by the Euroclear international depository on July 23 as the first tranche.
In a document explaining how the funds transfer would work, the European Commission stated that the funds will not go directly to Kyiv. Instead they will be channeled to the EC, to the European Peace Facility, to compensate EU countries for weapons.
“The money will now be channeled through the European Peace Facility and to the Ukraine Facility to support Ukraine’s military capabilities as well as to support the country’s reconstruction,” the European Commission said.
According to the EC’s explanations, 90% of the financial contribution from the extraordinary revenues will go to the European Peace Facility (EPF) and 10% will go to the Ukraine Facility to support Ukraine’s military and reconstruction needs, respectively.
The European Peace Facility is used to compensate EU countries for supplies of weapons to Kyiv (on average at the level of payment of 40% of the cost of weapons and ammunition delivered), while funds from the Ukraine Facility are used to pay for supplies of electric generators, for example.
The EC oversees both funds.
At a press briefing in Moscow, Kremlin spokesman Dmitry Peskov warned that Russia will respond to the transfer of €1.5 billion ($1.63) in proceeds from frozen Russian assets.
Peskov said that the EU’s move was “illegal” and that Russia would take “well-thought-out actions” in response.
He said, “Such steps by the European Commission will not remain unanswered.”
He emphasized that Russia’s response “must be carefully considered and fully aligned with Russian interests.”
Russia has repeatedly threatened retaliation to any use of frozen Russian assets to finance Ukraine.
Commenting on the state of the Russian economy, Peskov noted that President Vladimir Putin is satisfied with the government’s and Central Bank’s performance, highlighting positive economic indicators.
Russia’s Central Bank Raises Key Rate
Meanwhile, Russia’s Central Bank raised its key lending rate to its highest level in more than two years to stem soaring inflation.
The bank raised the rate by 200 basis points to 18.00%, noting that inflation has accelerated and is developing “significantly above” its forecast.
“Growth in domestic demand is still outstripping the capabilities to expand the supply of goods and services,” the bank said in a statement.
It added, “For inflation to begin decreasing again, monetary policy needs to be tightened further.”
It noted that inflationary risks have been driven by high inflation expectations and changing trade terms as a result of “geopolitical tensions,” a reference to Western sanctions against Russia over its action in Ukraine.
Governor Elvira Nabiullina said during a press conference that the economy was showing stubborn signs of “overheating” and pointed to trading difficulties as another factor driving up inflation.
“The risks of secondary sanctions have indeed increased. We see this in the difficult situation with payments,” she said, adding that Russian importers were facing higher transaction costs.
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