BRUSSELS — Belgium has established its conditions regarding the use of Russian assets to finance a €140 billion reparations loan to Ukraine, insisting on an agreement among EU nations to share all current and future risks associated with the initiative, which could exceed €170 billion. As EU capitals work to address Belgium’s concerns ahead of a pivotal summit on October 23, reaching a political consensus would enable the bloc to propose a legal framework shortly thereafter.
Among the 27 EU countries, Belgium has a significant stake in this matter, hosting Euroclear, the financial depository that manages the majority of Russian state assets frozen following the nation’s full-scale invasion of Ukraine in February 2022. The Belgian government is apprehensive about potential legal and financial repercussions from Russia and has been vocally advocating for guarantees from all EU member states to cover the loan, which would essentially use taxpayer funds for any associated costs.
Belgium’s conditions for the loan
“These guarantees cannot be limited to the €170 billion in cash that the Commission proposes to mobilize,” Belgian Prime Minister Bart De Wever stated to EU leaders during an informal summit in Copenhagen last week. “The potential exposure could be much higher than the nominal amount.”
Additionally, De Wever stipulated that “the guarantees do not automatically end when sanctions are lifted. Arbitration procedures could still emerge years later.” This statement, which highlights the Belgian government’s concerns, was shared with European leaders on October 1 and outlines the critical parameters that De Wever has established for his counterparts and the EU executive, who are searching for ways to make the proposal acceptable to Belgium.
Among the conditions, Belgium has made it clear that it will not endorse any measures that could be interpreted as asset confiscation. Furthermore, it has requested legally binding and strictly enforceable guarantees that all EU nations would share both current and future risks related to Euroclear and Belgium, as well as an immediate commitment of funds should Euroclear need to return assets to Russia following a potential peace agreement.
Concerns over legal implications
A senior EU diplomat, speaking on condition of anonymity to discuss the confidential statement, remarked, “The statement by the Belgian prime minister raised lots of difficult questions and they are still being examined. The guarantees must be sound at the end of the day.”
The European Commission has proposed utilizing €175 billion from frozen Russian assets, invested in Western government bonds, to finance the €140 billion reparations loan to Ukraine and to repay a prior G7 loan to the war-torn nation. This cash is currently held at the European Central Bank (ECB) under Euroclear’s management.
In his remarks, De Wever indicated that the Commission’s plan could be perceived as a form of confiscation, countering the Commission’s assertion that the loan would not involve the seizure of Russian state assets. He expressed concern, stating, “The distinction between a reparation loan and confiscation is, in reality, extremely narrow. If these assets remain immobilised for an extended period, the arrangement could be seen as a quasi-confiscation.”
Moreover, he pointed out that the scheme might violate the bilateral investment treaties Belgium and Luxembourg hold with Russia, established during the late stages of the Cold War in 1989. However, the Commission has minimized these concerns, with a senior official stating that the “risks for Belgium are limited [and] we have a solid base in saying that this is not confiscation under EU law.”
De Wever also warned that such operations could lead to a withdrawal of deposits from Chinese investors at Euroclear, who may fear potential future asset seizures. In response to similar apprehensions, the senior Commission official countered that “the only change we’re proposing for Euroclear is to invest [the cash deposits linked to the assets] not in the ECB but with [the Commission],” which holds a triple A rating.
Furthermore, the European Central Bank has cautioned against any formal asset seizure, fearing it could undermine the euro’s standing on the global stage and provoke retaliation from other nations.