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Europe must find a way to help fund the fight against Putin – for its own sake



Europe has plotted an elegant decline that suits the needs of its ageing population, and the Ukraine war cannot be allowed to interfere with that plan.

That is how it seems when EU countries consider circumventing the financial rulebook to offer Ukraine what it needs to overcome waves of drones and break the deadlock on its eastern front.

Leaders in Europe’s capitals, who understandably want to be left alone to tackle mundane, domestic tasks, find themselves confronted by a defining moment in post-second-world-war history. Britain – as much a part of Europe as it was in 1939 – stands with its continental neighbours at the same crossroads.

In one direction is a path leading to the defeat of Vladimir Putin and, among other things, the restoration of peace, a return to stable food and energy prices, calmer financial markets and a possible improvement in living standards for millions of low- and middle-income families.

In the other direction is a future in which Putin secures a large slice of Ukraine and plots his next move knowing that Europe, including Britain, has failed to fully grasp the nature of the threat he poses.

Already, elections are being manipulated and rogue foreign powers supported, undermining efforts to bring settled peace agreements where disputes break out.

For Europe, self-interest should be allied to the charitable urge to prevent Ukrainians from being rounded up and sent to the gulag in their hundreds of thousands.

There is a fatalistic view that says Europe’s destiny lies in the hands of whoever is in the White House. And it is obviously true that Washington matters. Yet, together, France, Germany, Spain, Italy and the UK have the firepower and resources to support Ukraine and help it re-establish pre-2014 borders.

Germany, though, is confused about its role. When asked about the need to use Russian assets in European financial centres to fund the war, it says the postwar international order must be observed.

It’s not alone in this view, but Berlin is at the heart of the debate about using an estimated $300bn of Russian central bank assets, much of them residing in Belgium’s Euroclear exchange, to pay for the war effort.

A spokesperson for Berlin said: “The federal government’s actions are guided by the need for our support for Ukraine to be in line with the principles of international law.

“Hence it is important that these principles of international law are adhered to in connection with sanctions as well. Otherwise, we will jeopardise our credibility, including in the global south.”

Another defence is that a “register of damage” has been established to make Russia pay for the destruction of Ukraine when the war is over.

This is sweet music to Putin’s ears. As Timothy Ash, the Chatham House expert, says: “Forget any thoughts one might have about recovery and reconstruction. Ukraine needs to win the war first, which means giving it the money to buy arms ­wherever it can get them.”

Germany had “done everything within its legal powers to track down Russian state assets and those of sanctioned individuals and companies, limit their use and freeze them”, Berlin’s spokesperson added.

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Yet German exports continue to pour into Moscow via countries such as Armenia, handing Putin’s supporters the high-end cars they desire and the mechanical and electrical parts they need to produce or maintain consumer goods.

Armenia rightly points out that the export of goods to Russia cannot be blocked “unless those goods are under sanctions and included in the common high priority [CHP] list”. Putting items on the CHP list is the EU’s job, and Germany could be doing more to make that happen.

More broadly, there is strong evidence that sanctions are strangling the Russian economy, but the slow pace means more needs to be done.

Nigel Gould-Davies, senior fellow for Russia and Eurasia at the International Institute for Strategic Studies, says a legal way to use $300bn of Russian assets has already been established by experts; only a lack of will stands in the way.

He says the west should go further, implementing a general prohibition on trade with Russia. “As with other sanctions regimes, exceptions may be carved out,” he says. “But the presumption should be that no western company helps a regime that threatens vital western security interests.”

The exceptions, he says, could allow private Russian funds to find a home elsewhere in the world, in effect bleeding Moscow’s financial institutions dry. Without the means to pay China for its wares, Beijing’s helping hand would be withdrawn.

The Ukraine war is not a side issue, demanding a few extra billion pounds from stretched finance ministries. It is a fundamental threat to European economies that politicians must address with greater urgency.

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