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25th Sep 2022

Estonia proposes using Russian energy profits to rebuild Ukraine

  • 'We need to dry up the war machine of Putin,' said Estonian prime minister Kaja Kallas (Photo: European Union)
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Estonia wants the EU to set up an escrow account to capture part of the payments for Moscow's oil and gas and use it to rebuild Ukraine — a move that would allow the EU to keep buying Russian fossil fuels.

"We need to dry up the war machine of [Russian president Valdimir] Putin … and start thinking about how to get funds for the reparations in Ukraine," Estonian prime minister Kaja Kallas said on Thursday (24 March) before meeting with EU leaders at a summit in Brussels.

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She said the idea would be discussed among EU leaders on Thursday evening, although several member states were still assessing how this could be implemented.

A few leaders had already raised the idea at a previous meeting earlier this month in Versailles. It is inspired by examples such as the UN oil-for-food programme that helped to provide humanitarian aid for the Iraqi people during the Saddam Hussein regime.

The proposal comes after intense discussions over whether imposing sanctions on Russian oil and gas exports would hurt European economies as much as Russia.

"Everything is on the table, but we need something quickly," an EU diplomat said.

This is a kind of "compromise" between a total embargo and doing nothing that should fit everyone except Russia, the diplomat added.

But some EU countries think this response could end up hitting Europeans harder.

"This is price capping wrapped in a more acceptable costume: because you are still setting a different price, but now are using the difference — the so-called war bonus — to help Ukraine," another diplomat told EUobserver.

The diplomat warned that this is "a high-stakes poker bluff" because Europe could suffer the most if the Russians call it and sell their gas and oil somewhere else.

EU leaders have been so far unable to impose sanctions on Russian energy exports, fearing that such a move could hurt member states which are heavily reliant on Moscow's fossil fuel supplies.

Germany, which is highly dependent on Russian gas, opposes sanctions on energy exports. Other member states such as the Netherlands and Hungary also see it as a red line.

But countries including Estonia, Lithuania, Latvia, Poland and Finland support cutting all oil and gas trade with Russia because these are its two main sources of income internationally.

"As long as we are purchasing energy from Russia we are financing the war," said the prime minister of Finland, Sanna Marin ahead of the summit.

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