After more than two years of debate, EU states last week adopted a plan to use windfall revenues from seized Russian central bank assets to fund Ukraine’s defense. The 27-nation bloc holds about €200 billion ($217 billion) in Russian central bank assets, which were mostly frozen in Belgium as part of the economic statecraft tactics employed during the Ukraine war. The plan adopted last week will allow 90 percent of the profits raised from the money to be used by the European Peace Facility, the entity the EU states already use to get recompensed for the ammunition and arms they send to Ukraine. The other 10 percent will be put in the EU budget and is expected to boost Ukraine’s defense industry, in addition to reconstruction. In total, the EU expects the plan to yield €15 billion to €20 billion by 2027. European Commission President Ursula von der Leyen stated in March that, if the deal was finalized swiftly, the first €1 billion could be transferred on July 1. She stressed that “concrete action” would be conducted over the summer months. The Kremlin responded by stating that the decision violates the norms of the global economic system. Even the well-known British newspaper The Guardian acknowledged that “the move is still laden with legal risk. There is a possibility the money would have to be returned after the war if Russia launched legal action.” Russian Foreign Ministry spokesperson Maria Zakharova has already stated that the EU would feel the “full measure” of Russia’s response following such actions. It should be remembered that, like the EU and the G7, Russia has also employed economic measures as part of its diplomatic statecraft. President Vladimir Putin on Thursday signed a decree allowing the use of US property in Russia as compensation for damages resulting from the seizure of Russian property in the US. Moreover, a Russian court this month ordered the seizure of the accounts, assets, property and shares of Deutsche Bank and Commerzbank following a lawsuit against the German banks. According to documents from May 16, a court in St. Petersburg ordered the seizure of €239 million from Deutsche Bank and €93.7 million from Commerzbank. These banks were among the guarantors of a contract with the German company Linde for the construction of a gas processing plant in Russia. However, the project was terminated due to the Western sanctions. In April, I attended a lecture by a high-level EU decision-maker, who stressed that he knew how to end the Ukraine war within two weeks and that it required the cessation of military aid to Ukraine from the EU. However, it is clear that this would mean Brussels engaging with the Kremlin’s desire that all parties (Kyiv, the EU and the US) accommodate Russia’s “geopolitical and territorial interest.” This is not in the interest of the EU, which supports Ukraine’s demands for peace, including the withdrawal of Russian troops and a return to the country’s 1991 borders, meaning the return of Crimea and the country’s eastern oblasts. In turn, these terms would be flatly unacceptable to the Kremlin. The war is approaching a phase in which economic statecraft will be used by both sides to apply pressure on the other. Dr. Diana Galeeva The move to use the profits from frozen Russian assets results from the pressure on EU countries to do more to support Ukraine’s defense after delays in aid from the US and in the context of Russian advances on the battlefield. The most intense battles have been in the east of Ukraine, where Russian forces are putting pressure on the Kurakhove and Pokrovsk fronts in Donetsk and in Kupiansk, which is in the east of the Kharkiv region. This move also came a few weeks ahead of a high-level peace summit scheduled to be held in Switzerland in June, to which Moscow has not been invited. Clearly, when Moscow is excluded from the negotiations, the peace summit can move productively without Russian obstructionism, but peace cannot actually be achieved until the summit draws up terms that the Kremlin finds acceptable. Therefore, the war is approaching a phase in which economic statecraft, in particular, will be used by both sides to apply pressure on the other. In her March address, Von der Leyen shared a proposal to increase customs duties on oilseed, grain and derivative products from Russia and Belarus. According to the European leader, this will “prevent the Russian grain from destabilizing the EU market in these products, it will stop Russia from using the revenues from the export of these goods to the European Union and it will ensure that illegal Russian exports of stolen Ukrainian grain do not enter the EU market.” Meanwhile, in Russian government institutions, so-called mirror diplomatic actions and economic tools are already being discussed amid efforts to pressure Moscow’s opponents. To sum up, recent EU actions indicate the beginning of a new phase in the Ukraine war, where increasing pressure will be applied from both sides. Both Kyiv and Moscow remain firm on their peace demands, each of which cannot be considered by the other side. For this reason, the only option left is for the two sides to put economic pressure on each other, especially as the European strategic policy in the short-term will be weighted toward negative sanctions, including embargoes, boycotts, blacklists, preclusive buying, expropriation and asset freezes. Overall, if the EU wants to end the war, it would need to stop offering aid to Ukraine, representing a failure of its objectives, which it would clearly prefer to avoid. • Dr. Diana Galeeva is an academic visitor to Oxford University. X: @Dr_GaleevaDiana