European Commission President Ursula von der Leyen urged the European Union to significantly bolster its defence capabilities and urgently ramp up the production of ammunition.

Moldova’s breakaway region of Transnistria called on Moscow to come to its aid in a standoff with the central government, as pro-European President Maia Sandu’s administration attempted to reassert its control over the Russian-speaking enclave.

Alexei Navalny, the Russian opposition leader who died in prison earlier this month, will be buried on Friday in Moscow, his allies said, after previously accusing authorities of trying to interfere with the activist’s funeral.

US and Europe at odds on tapping €260bn of Russian assets

The US and its European allies say they’re determined to use frozen Russian assets to help Ukraine — somehow. In Brazil this week, they’re arguing about the best way to do it without getting into legal or financial jeopardy.

Western nations have frozen about €260-billion in securities and cash, more than two-thirds of it in the European Union. They all agree those funds should remain off-limits from Russia unless it pledges to help with Ukraine’s reconstruction. But they’re at odds over whether it’s lawful to cross the Rubicon by seizing the assets outright — so the challenge is to squeeze funds out without depleting them.

With Russia on the front foot militarily as its invasion enters a third year, and aid from the US facing roadblocks in Congress, there’s a growing willingness to consider what once were viewed as high-risk moves. The US has been leading the push, with Treasury Secretary Janet Yellen this week saying the legal and moral case was strong and seeking to assuage European doubts. The UK has also expressed support for seizing the assets.  

France and Germany, along with the European Central Bank, have expressed the most caution. They worry about Russian retaliation targeting European assets there, and the impact on financial stability and the euro’s status as a reserve currency, according to people familiar with the matter. The danger, it’s argued, is that such a drastic move would set a precedent — pushing other nations to avoid holding their reserves in Western currencies in case they’re one day subject to similar penalties.

“We don’t have the legal basis to seize the Russian assets now,” French Finance Minister Bruno Le Maire said on Wednesday after a meeting of Group of Seven finance ministers in São Paulo. “We need to work more.” 

G7 officials and lawyers are examining a range of options they can offer to national leaders at their June meeting in Italy, since any move will require a political decision at the highest level, the officials said.  

All proposals carry risks of some kind. Some involve using the Russian assets as collateral to raise cash, via bond sales that would issued by or steered toward Ukraine. While that would avoid the optics of a flat-out seizure, it ultimately raises the same legal objections — because the assets would have to change hands in the first place before they could be used as a basis for new fundraising.

One workaround that’s being floated, and might be more palatable to the doubters, involves using the principal without actually seizing it. The idea — as outlined by the Atlantic Council’s Charles Lichfield — is that G7 governments would provide a “guarantee” to markets that the frozen assets would not be returned to Russia unless it agrees to pay the cost of Ukraine’s reconstruction.

Europe must ramp up defences to threats, warns Von der Leyen

Ukraine’s allies should consider using profits from frozen Russian assets to buy weapons for Kyiv, European Commission President Ursula von der Leyen said, warning Europe must prepare for the risk of a wider war.

Speaking to the European Parliament on Wednesday, she urged the European Union to significantly bolster its defence capabilities and urgently ramp up the production of ammunition.

“There could be no greater symbol and no greater use for that money than to make Ukraine and all of Europe a safer place to live,” Von der Leyen said in a reference to windfall profits of frozen Russian assets. “Ultimately this is about Europe taking responsibility for its own security.”  

Read more about the EU and defence:

• EU’s new defence plan aims to boost European military purchases
• Yellen sees moral case to use Russian assets to aid Ukraine
• Macron’s ambiguity on Ukraine backfires as allies baulk at troops

“We need to move fast. The threat of war may not be imminent, but it is not impossible,” Von der Leyen said. “The risks of war should not be overblown, but they should be prepared for.”

Von der Leyen’s comments come as the commission, the EU’s executive arm, is due to present its sweeping defence strategy as soon as next week. As Bloomberg reported, the document includes proposals on how to rapidly ramp up the bloc’s defence production and designate joint military projects for EU funding, including on space and air and missile defence.

The EU is slowly making progress on plans to apply a windfall tax to the profits generated by the immobilised funds, the vast majority of which are held by Belgium-based clearing house Euroclear. Last year, the funds enabled profits of €4.4 billion.

EU efforts to bolster its defences after years of underspending are growing urgent amid warnings that Russia could look to target Nato allies after its war on Ukraine and amid doubts about the US commitment to European security, especially if Donald Trump wins another term in the White House.   

Moldova’s rebel region appeals to Putin as its leverage slips

Moldova’s breakaway region of Transnistria called on Moscow to come to its aid in a standoff with the central government, as pro-European President Maia Sandu’s administration attempted to reassert its control over the Russian-speaking enclave.

The plea for help from Russia was made at a congress convened on Wednesday in Tiraspol, the Transnistrian capital, in response to what the self-proclaimed administration said was economic coercion by the Moldovan government.

While the development recalled events in the lead-up to Russia’s invasion of Ukraine, it fell short of widespread speculation that the pro-Kremlin region was about to call a referendum on joining the Russian Federation — a step that would echo sham votes staged in occupied territories of Ukraine.  

Moldova’s ambassador to the US, Viorel Ursu, dismissed the Transnistrian move as “orchestrated by Russia to create a diversion”.

“They have been asking to reunite with Russia for decades and have held referenda before,” he said in an interview in Washington. 

The US has seen no credible evidence that Russia has plans to annex Transnistria, according to a US official, who said that Washington continued to monitor the situation given previous Russian interference. 

Moldova, a landlocked nation of 2.6 million people wedged between Ukraine and Romania, has come under intense pressure since the start of Russia’s war on Ukraine two years ago, with its traditional dependence on Russian gas triggering an energy crisis.

Those tensions have played out in Moldova’s relations with Transnistria, a narrow strip of land on the eastern frontier with Ukraine that is home to ethnically Russian separatists running a pro-Kremlin breakaway republic. As well as military units, it hosts Soviet-era ammunition depots and the main power plant supplying the country as a whole.  

Navalny funeral to be held in Moscow on Friday, challenging Putin

Alexei Navalny, the Russian opposition leader who died in prison earlier this month, will be buried on Friday in Moscow, his allies said, after previously accusing authorities of trying to interfere with the activist’s funeral.

Navalny will be buried in the city’s Borisov cemetery following a funeral service at a church in the Marino district of southeast Moscow, his spokesperson Kira Yarmysh said on Wednesday in a social media message that asked the politician’s supporters to attend.

The funeral will take place a day after President Vladimir Putin gives his annual address to Russia’s Federal Assembly. Even amid an unprecedented Kremlin crackdown on dissent, the scale of the turnout is likely to be an indicator of the strength of opposition to his rule just weeks before the 17 March election that will hand him another six years in power.

“I am not sure yet whether it will be peaceful or whether the police will arrest those who have come to say goodbye to my husband,” Navalny’s widow, Yulia Navalnaya, said in a speech on Wednesday to the European Parliament in Strasbourg, France.

Hundreds of people have been arrested after laying flowers in Navalny’s memory in Moscow and other cities since he died on 16 February in a remote Arctic prison camp. Yarmysh said on Tuesday that Navalny’s allies tried unsuccessfully to organise a farewell for him in Moscow, but nobody had been willing to hire out a hall to them.

“Some of them say the place is fully booked. Some refuse when we mention the surname ‘Navalny’,” she said. “In one place, we were told that the funeral agencies were forbidden to work with us.”

Officials on Saturday handed Navalny’s body to his mother Lyudmila Navalnaya after keeping it for more than a week. She accused them of trying to pressure her into agreeing to a secret burial for Putin’s most formidable critic, as US President Joe Biden and European leaders blamed the Russian ruler for Navalny’s death.

Talks were under way before his death that could have seen the Russian dissident freed in a prisoner exchange with the US and Germany, a Western official said.

Penitentiary officials said Navalny (47) died after falling ill at the maximum security prison camp where he was serving 19 years on extremism charges. DM