BRUSSELS (AP) — Nearly four years into Russia’s full-scale war in Ukraine, European Union leaders have pledged to subsidize Kiev’s economic and military needs in one way or another for the next two years. Ukraine is desperate and needs money in early 2026.
At a summit next week, 27 EU leaders will weigh whether to use tens of billions of dollars in Russian assets stashed in Europe to help meet Ukraine’s needs, which the International Monetary Fund has put at 135 billion euros ($157 billion).
Such a move has never been made before, and it comes with risks. The European Central Bank has warned that if Europeans appear willing to grab other countries’ money, it could undermine confidence in the euro currency. Some member states are also worried about retaliation from Russia.
Belgium, where most of the assets are located, is the scheme’s main opponent. It is feared that Russia will strike back through the courts or worse. A series of drone incidents last month near airports and military bases suggested the Kremlin was already doing so, but those responsible were not publicly identified.
European Council President Antonio Costa, who will chair the December 18 summit, has insisted that leaders should not leave EU headquarters in Brussels until a decision is reached.
Two options await debate
In February 2022, EU leaders pledged money to the war launched by Putin, most of which is the assets of the Russian central bank. Moscow has described the plan as “theft”.
Two plans have come up. The first will be a “reparation loan” that will use Russian assets until Moscow agrees to pay for damages in Ukraine. Few think Russian President Vladimir Putin will agree to pay reparations.
Plan B would be for the EU to borrow money on financial markets, just as the bloc did to fund a massive debt plan to revive European economies after the coronavirus pandemic.
Most of Europe’s major economies are cash-strapped and debt-ridden. But Russia’s war in Ukraine threatens the bloc’s existence. Intelligence assessments suggest that Putin could start a war elsewhere in three to five years if he loses Ukraine.
Assets potentially create a substantial pot of ready-to-use cash.
The European Commission, the EU’s executive arm, estimates that 210 billion ($244 billion) in total assets are currently held in Europe. Most of that – about 193 billion euros ($225 billion) at the end of September – is held at a Belgian financial clearinghouse known as Euroclear.
There are also political benefits. If the EU chooses to use the assets, only a “qualified majority” of countries — roughly a two-thirds majority — would be needed for the green light. Lending in financial markets must be supported by everyone, which means that even one vote will not sink the idea.
Over the past year, Hungary has blocked EU support to Ukraine at almost every turn. Slovakia’s government is also digging in its heels. A new and strongly nationalist leader in the Czech Republic could further complicate the decision.
Avoiding the veto is in the interests of the vast majority of member states.
Details of Reconciliation Loans
Unveiling her plan on December 4, European Commission President Ursula von der Leyen said the EU would cover two-thirds of Ukraine’s needs for 2026 and 2027, a total of 90 billion euros ($105 billion). International partners will fill this gap.
Due to EU sanctions on Russian assets, cash balances are deposited in Euroclear. They have generated interest — about 3.9 billion euros ($4.5 billion) this year, Euroclear says — that is already being used to fund seven debt plans for Ukraine.
Under the new plan, some of the cash will be transferred to an EU debt instrument. Ukraine can pay the EU money but only after the bloc’s sanctions are lifted and Russia agrees to pay war reparations.
The commission insists that there is no “theft” as claimed by Russia, as the right of the Russian central bank to claim its money and Euroclear’s duty to return it remain intact.
Once Putin pays the war reparations, Ukraine will repay the EU, the EU will repay Euroclear, and Euroclear will repay the Russian Central Bank.
Protest from Belgium
Importantly for Belgium, the plan includes safeguards to ensure that risks are shared by its partners. Other EU countries offer to guarantee the loan if something goes wrong. Germany has already indicated that it will do so.
But the Belgian government is not convinced. Before the commission’s compensation loan plan was made public, Foreign Minister Maxime Prévot said it “contains consequential economic, financial and legal risks.”
Prévot said that Belgium – a strong supporter of Ukraine that has provided military and financial support – feels that its concerns are not being heard by its EU partners.
“We are not trying to antagonize our partners or Ukraine. We are just trying to avoid potentially disastrous consequences for a member state that is being asked to show solidarity without offering the same solidarity in return,” he said.
In an interview with Belgian public broadcaster RTBF last week, Euroclear CEO Valerie Urbain also said that court action could not be ruled out if the EU forced the clearinghouse to hand over its Russian assets.
