Could the EU’s new Russian assets leverage plan actually work?

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Good morning. Brussels has scrapped a key target for cutting agricultural greenhouse gas emissions in its 2040 climate road map to be published today, officials told the Financial Times, in a knee-jerk response to farmers’ protests that have spooked governments across the EU.

Today, our Rome bureau reports on how Italy’s capital is bracing itself for the arrival of its branch of the angry tractor brigade. But first, the EU’s economy commissioner tells our correspondent he’s lukewarm about a new ploy to use immobilised Russian sovereign assets to help Ukraine.

Still frozen

The EU is sceptical about a Belgian plan to leverage debt for Ukraine against Russian state assets immobilised under sanctions, writes Paola Tamma.

Context: Ukraine, the US and other allies are pushing to use the $300bn-odd of immobilised Russian sovereign assets to help Kyiv as it defends against Moscow’s invasion. The majority of the assets are frozen in Europe, and the EU’s G7 members — France, Italy and Germany — fear the financial and legal repercussions of such an unprecedented move.

One idea, floated by Belgian Prime Minister Alexander De Croo that has got traction with the US, offers a canny middle-ground: G7 members would set up a special purpose vehicle that would issue debt in the name of the Russian state using those assets as collateral in case Russia refuses to pay for damages it caused in Ukraine. The G7 is assessing the legal feasibility of this option.

But it did not get a ringing endorsement from the EU. “We have a very gradual approach. We go step by step . . . at the moment we took one single decision,” EU economy commissioner Paolo Gentiloni told the FT, referring to the EU’s move to separate profits arising from the assets immobilised in the bloc, with a view to confiscating them for Ukraine at a later stage.

“Within the G7, we are discussing different scenarios, opinions,” the Italian said, adding: “We need common decisions and solidarity at G7 level, but at the same time this is especially a European issue, because the assets are mostly here.”

The US idea of confiscating and providing the assets to Kyiv had gathered momentum given Hungary’s blockade of €50bn of EU aid for Ukraine, as well as $60bn in military aid for Kyiv being stuck in Congress, which is coming to a head this week. 

But the bloc’s unanimous decision to aid Ukraine last week, and a possible solution to the US impasse, takes some of the pressure off, according to Gentiloni.

“The fact that we decided and possibly the US is also deciding on financial support [for Ukraine] gives us a little bit more time to avoid addressing these issues in a rushed way,” he added.

Chart du jour: Migration microcosm

In the Italian port of Monfalcone, the town’s huge foreign population is a boon for shipmaker Fincantieri. Not so for its far-right mayor. Read this fascinating dispatch from the frontline of Europe’s migration debate.

All roads lead to Rome

For weeks, northern European capitals have endured protests from farmers angry at EU policies. Now Italian farmers are joining the fray, bringing their tractors to Rome to demonstrate their discontent, report Giuliana Ricozzi and Amy Kazmin.

Context: Italian farmers have long complained about Brussels’ agricultural and environmental policies, which they deem restrictive; and unfair competition from outside the EU, where countries do not impose the same stringent regulations. 

Inspired by fellow European cultivators, they are taking to the streets. Initially, their protests took place in rural areas, with sit-ins near highway toll booths, and small cities closely tied to the surrounding countryside. Now, they are advancing on Rome and Milan, Italy’s political and financial capitals.

“The European Union’s green directives are slaughtering us,” farmer Danilo Calvini, protest leader, told the FT, claiming that the rules “have put a noose around our necks”.

But Brussels isn’t their only target: they are also fuming at Prime Minister Giorgia Meloni’s decision to scrap an income tax exemption said to be worth more than €200mn, which Rome is now reconsidering.

Yesterday, the tractors reached Milan, where they surrounded the regional government headquarters and displayed banners declaring: “You are destroying our future” and “Agriculture is life, respect it.” Meanwhile dozens left Tuscany for Rome, where farmers from all over Italy are expected to converge this week.

Meloni and her ministers have expressed sympathy for the protesters, an important constituency for the ruling coalition, and tried to blame the EU’s green agenda. 

Speaking in Japan yesterday, Meloni said farmers were justified in their fury and slammed Brussels’ “ideological” policy approach, which she said sought to “defend the environment by fighting farmers”.

What to watch today

1. European Commission president Ursula von der Leyen and EU Council president Charles Michel speak at European parliament plenary, from 9am.

2. Informal meeting of EU ministers responsible for cohesion policy in Mons.

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