EU leaders opted for joint debt to fill Ukraine’s war chest, holding Moscow’s frozen assets as collateral.
BRUSSELS — President Vladimir Putin slammed EU leaders for trying to leverage frozen Russian state assets to fund a €210 billion financing package for Ukraine — despite the plan ultimately falling through.
Facing stiff resistance from Belgium, where most of the Russian assets reside in the financial depository Euroclear, leaders decided in the early hours of Friday to raise €90 billion in EU debt instead and lend the money to Kyiv, at zero interest, so it could keep defending itself against Russian forces.
The assets, however, will remain frozen until Moscow ends the conflict and pays war reparations to Ukraine. If that doesn’t happen, the EU reserves the right to use Moscow’s assets to pay themselves back.
“It’s robbery,” Putin said Friday during his annual question and answer session with journalists and the Russian public. “But why isn’t it working? Why can’t they carry out this robbery? Because the consequences could be severe for the robbers.”
“No matter what they steal or how they do it, sooner or later they will have to give it back,” the Russian president added, warning that such actions undermine investors’ trust in the eurozone. “We will defend our interests, particularly in the courts.”
Putin’s legal threats aside, Ukraine’s fresh cash injection in the new year means Russia will be forced into a longer war, as its economy begins to creak under the strain of international sanctions.
Official estimates suggest the Russian economy will only grow 1 percent this year, with all of that and more accounted for by military spending. Residential construction — always a key concern — has also fallen around 4 percent this year.
As polls have indicated, the second-most pressing issue for Russians is the economy.
Putin batted away any concerns about the state of his economy during the press conference. The sharp slowdown in growth this year has been a “deliberate action” by the government and central bank to stop it from overheating, he said.
Putin went on to claim that the government’s actions had helped to “balance” the budget, but noted it will be in deficit both this year and next, despite extensive tax hikes. Current projections see the deficit at 2.6 percent of GDP this year, falling to 1.6 percent next year.
While that looks small in an international context, the country’s stunted capital market means that it has to pay heavily to finance it. The government currently has to pay nearly 15 percent to issue 10-year debt.
