By Gabriela Baczynska and Andreas Rinke
BRUSSELS (Reuters) - The European Union could use proceeds from frozen Russian assets to help Ukraine within a few months under a plan that includes buying arms for Kyiv, EU leaders said on Thursday.
Leaders of the bloc's 27 member countries agreed at a summit in Brussels to move ahead with work on the plan, presented this week by the EU's executive body, the European Commission.
"I am confident that we can act very quickly," Charles Michel, president of the European Council of EU leaders, told reporters.
The leaders' desire for urgency reflects increasing alarm about the war in Ukraine, with Kyiv's ammunition-starved forces struggling to hold back Russian troops and a $60 billion military aid package for Kyiv stuck in the U.S. Congress.
European Commission President Ursula von der Leyen said the first 1 billion euros ($1.09 billion) from the scheme could be disbursed as soon as July 1.
The Commission has proposed transferring 90% of profits from the frozen Russian assets to an EU-run fund used to finance arms for Kyiv. The other 10% would go to budget aid for Kyiv.
The Commission estimated the profits on the assets - various Russian central bank securities and cash - could be between 2.5 billion euros ($2.73 billion) and 3 billion euros per year.
The idea of using the proceeds of frozen Russian assets to benefit Ukraine - which Moscow says would be theft - has broad support among EU governments, Michel and von der Leyen said.
EU heavyweights Germany and France voiced strong backing to the plan.
"These (proceeds) should first of all be used to buy those weapons and ammunition that Ukraine needs to defend itself," German Chancellor Olaf Scholz said.
But using the money to buy weapons is more problematic for some countries, including neutral militarily non-aligned countries such as Malta, Austria and Ireland.
"For us neutrals it must be ensured that money, for which we give our approval, is not spent on weapons and ammunition," Austrian Chancellor Karl Nehammer said.
Michel said the EU could find ways to take into account their concerns as part of the scheme.
Ukrainian President Volodymyr Zelenskiy urged the EU to go even further and use the assets themselves as well - something the bloc is not considering.
"Russia must feel the real cost of war and the need for a just peace," Zelenskiy told the EU leaders via video link.
Zelenskiy said it was "humiliating for Europe" that Ukraine did not have enough artillery in its fight against Russia, which invaded its neighbour in February 2022.
Russia said on Thursday its artillery shell production had soared over the past year.
MORE DEFENCE FUNDING
Meanwhile, some Western banks are lobbying against the EU proposal, fearing it could lead to costly litigation, industry sources said.
The bloc's 27 national leaders also debated how Europe can do more to defend itself and boost its arms industry, reflecting fears that Russia will not stop at Ukraine and the United States may not be such a staunch protector of Europe in future.
French President Emmanuel Macron and others have embraced a proposal by Estonian Prime Minister Kaja Kallas for European defence bonds. Other countries, including fiscally cautious Germany, Austria, the Netherlands and Sweden, are sceptical.
In their summit declaration, the leaders instructed officials to "explore all options for mobilising funding and report back by June".
They also called on the European Investment Bank, the bloc's lending arm, to "adapt its policy for lending to the defence industry" - a nudge to get the bank to embrace investing in military technology.
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