BRUSSELS — The European Commission has introduced a significant reparations loan proposal amounting to €165 billion for Ukraine, utilizing the cash value of frozen Russian state assets currently held in Belgium, as per documents that have come to light.
Financial support amid ongoing conflict
This reparations loan is part of a more extensive financial assistance package valued at up to €210 billion, aimed at ensuring the stability of Kyiv’s finances in the coming years. Within this proposal, the €165 billion reparations loan consists of €25 billion from immobilized Russian state assets located in private bank accounts throughout Europe, alongside €140 billion secured in the Euroclear bank in Belgium. It is crucial to note that Ukraine’s financial reserves are expected to be depleted by April.
The legal framework for this proposal will form the basis for immediate technical negotiations, with the intent to finalize discussions before EU leaders convene in mid-December to address the more contentious elements of the initiative. Notably, Ukraine would only be obligated to repay the loan if Russia concludes the ongoing conflict and compensates for war damages, a scenario that many view as improbable.
Allocation of funds and political hurdles
Within the scope of this reparations loan, €115 billion is specifically designated for bolstering Ukraine’s defense industry, while €50 billion is intended to meet Kyiv’s immediate budgetary requirements. The remaining €45 billion will be allocated to service a loan from the G7 to Ukraine, commencing in 2024.
However, the proposal faces significant challenges, particularly due to the objections raised by the Belgian government regarding the loan. Belgian Foreign Minister Maxime Prévot expressed concerns, stating, “The text the Commission will table today does not address our concerns in a satisfactory manner.” He added that they feel a sense of frustration over not having their apprehensions adequately acknowledged.
Belgium’s fears center around potential Russian retaliation against the state and the financial institution managing the frozen assets, Euroclear. Consequently, the Belgian government is insisting on financial guarantees from other EU capitals to protect against the possibility of Moscow recovering these funds.
In response to the urgency of Ukraine’s situation, the Commission has indicated its willingness to provide temporary emergency financing to assist Ukraine in meeting its immediate needs at the beginning of the year, likely facilitated through EU debt instruments.