In a significant move to address the ongoing political impasse regarding the utilization of frozen Russian state assets, top officials from the European Commission and the Belgian government are convening on Friday. Their objective is to evaluate a proposal aimed at financing a €140 billion reparations loan to Ukraine, according to insights from two senior EU officials.
Belgium’s hesitance to support this initiative stems from concerns over the implications of utilizing sanctioned Russian funds, which are under the custody of the Brussels-based financial firm Euroclear. Prime Minister Bart De Wever has expressed significant apprehension about potential liabilities his government might incur if Russian legal representatives pursue claims related to this action. During the recent EU leaders’ summit in October, De Wever emphasized the need for robust assurances from fellow EU leaders to safeguard Belgium against any financial and legal repercussions associated with this plan.
Urgent meeting amid escalating concerns
Friday’s high-stakes meeting follows a failed attempt by deputy finance ministers earlier in the week to make headway on negotiations surrounding the reparations loan. The Commission has cautioned that the urgency of the situation is increasing. Economy Commissioner Valdis Dombrovskis indicated to reporters in Sofia, Bulgaria, that delays could complicate matters further, stating, “The longer we now run delays, the more challenging it will become. It may open questions on some possible bridging solutions.”
As it stands, Ukraine is facing a budget deficit in the coming year if financial support does not materialize by spring. The European Commission has warned member governments that, without an agreement on utilizing the Russian assets, they may need to resort to their own finances to support Kyiv, a scenario that many countries are eager to avoid given the financial strain from the recent pandemic.
“How are we going to get €140 billion out of European budgets at this time of year?” asked a frustrated deputy finance minister, who requested anonymity to express candid thoughts. “There’s no way.”
Belgium’s conditions for support
In order to consider backing the plan, De Wever has outlined specific requirements. Firstly, he seeks to mitigate the risk of a veto from Hungary or other nations regarding sanctions, as the EU mandates unanimous reauthorization of sanctions against Russia every six months. This means that any sympathetic nation could potentially reverse the freezing of Russian assets, which would necessitate Euroclear returning the funds to Moscow.
The Commission is actively working on strategies to eliminate this veto power, ensuring Belgium receives the long-term certainty it desires on this front. Additionally, Belgium is advocating for other EU nations to share the financial risks associated with the loan. While the Commission has assured that Ukraine would only begin repayment of the €140 billion once Russia ceases hostilities and pays reparations, the Belgians insist on obtaining financial guarantees from other EU capitals to shield against potential future claims by Russia.
Furthermore, Belgium insists that any guarantees provided by other EU countries should be immediate. Although the Commission has proposed lending to nations that may struggle to provide instant cash, such a solution could further inflate national debts—an unwelcome prospect for countries like France and Italy.
Lastly, Belgium is urging the Commission to explore the possibility of leveraging the EU’s existing seven-year budget to secure the loan, rather than depending solely on national governments. Theoretically, the Commission could utilize part of a cash reserve known as the headroom in the EU budget for this purpose. However, uncertainties remain regarding the adequacy of this headroom in the context of the current budget allocation.