After Russia destroyed the Tripoli Power Plant on April 11, Ukraine blamed it on a lack of anti-missile munitions. The country's leaders are also in desperate need of more financial support. The two shortages - of ammunition and money - reflect different constraints among Ukraine's allies. While the lack of ammunition is mostly a product of limited industrial capacity, the lack of money is a product of limited political will, writes the British magazine The Economist.
However, there are signs of progress on one issue: what to do with Russia's frozen assets. Western governments have frozen €260 billion worth of Russian assets since Russia's invasion of Ukraine, but proposals for their use have varied and so far have not gained widespread approval.
The Biden administration now wants to use the interest income on frozen Russian assets to "maximize the impact of that income, both current and future, to benefit Ukraine today".
British Foreign Secretary David Cameron also announced his support: "There is a consensus that the interest on these assets can be used."Although the EU agrees to confiscate profits from depositories, he does not support the next steps . Under current plans, the proceeds will be used to purchase Ukrainian ammunition through July, with a portion set aside to compensate depositories for possible legal action or possible retaliation by Russia.
Income earned by Russia's foreign assets can be confiscated in a way that is both legal and practical. Many of the country's bonds are already maturing. Bond redemption cash is held by the depositary in which it currently resides until withdrawn without interest being paid to the owner in accordance with the depositary's customary terms and conditions. All profits against these interests belong to the depositary - unless the state decides to tax them at a rate close to 100%.
Investing Russia's cash holdings in five-year German funds would bring in €3.3 billion a year, enough to service the EU's debt of around €116 billion at the same maturity.
However, some in Europe remain suspicious of the US willingness to unlock more money through financial schemes. The Americans' proposal for financial engineering may face legal obstacles. Ukraine would welcome even a drop of aid, but a large cash contribution like the one proposed by the US would be better. European politicians may be wise to adopt it before a possible change of administration in the White House.