By Jorge Liboreiro
That is the latest question besetting the ever-anxious minds of European leaders. The bloc is contemplating its most radical financial step since the start of Russia’s full-scale invasion of Ukraine. And it involves something that the Kremlin jealously covets: the sovereign assets. As you might know, the bulk of the Russian Central Bank’s assets frozen by Western allies is held at Euroclear, a central securities depository in Brussels. These bonds have matured into a cash pot of about €175 billion, with an additional €10 billion expected in the near future. Under the new plan, which, it must be noted, is still in early stages, Euroclear would directly transfer the money to the European Commission. Then, the Commission would issue a €140 billion loan to Ukraine, disbursed gradually over time and subject to conditions. (The remaining €45 billion would be used to continue an ongoing line of credit from G7 allies.) Ukraine would be asked to repay the loan only after Russia begins to compensate for the damages caused. Hence, the name “Reparations Loan”. Afterwards, the Commission would repay Euroclear, and Euroclear would repay Russia, completing the circle.
Ursula von der Leyen insists the scheme would not amount to the confiscation of sovereign assets, which is illegal under international law. “There is no seizing of the assets,” she once again stressed. “The Russian claim stays a Russian claim.”
However, given that the Kremlin is guaranteed to oppose any notion of reparations, the money, if transferred to Kyiv, would never be returned. For all purposes and intents, this could mean confiscation. German Chancellor Friedrich Merz openly used the term in a recent op-ed backing the loan. Denmark, Finland, Sweden, Latvia and Estonia are also among the proponents. “We have long argued in favour of a more offensive way of using the frozen assets because it’s simply not acceptable to have all these frozen assets and regard them as Russian equity with no chance of using them,” Swedish Prime Minister Ulf Kristersson said at a summit this week.
But not everybody’s so comfortable with the semantics. The “Reparations Loan” has brought Belgium, the host of Euroclear, right into the spotlight and turned its prime minister, Bart De Wever, into the must-listen leader. “I want the maximum of legal certainty. I want solidarity,” De Wever said in a remarkably frank press conference on Thursday. “I don't think this is an unreasonable position.” De Wever repeatedly described the Russian assets as “the chicken” and their windfall profits as “the eggs”. So far, the EU has only captured the extraordinary revenues to reinforce support for Ukraine, leaving the money itself untouched. But the new plan would go further and move the entire cash pot, potentially removing a powerful leverage for Kyiv and its allies at the negotiating table. “The question now is: can we eat the chicken?” De Wever asked. “The first problem, of course, is that you lose the golden eggs if you eat the chickens. You have to consider that.”
The premier made special emphasis on the need to ensure the mutualisation of risks so that Belgium, a country with a €664 billion GDP and 11 million citizens, is not left alone in the face of the Russian retaliation. The Kremlin has already warned it would hit back at any “theft”. “It is risky what we are going to do. I want everybody to be aware of that,” he said. “And I want a signature: We’re going in that boat with you. Whatever it takes.”
A few hours later, Viktor Orbán offered his reply. “Belgium needs the mutualisation of the responsibility. No way. We’re not part of the deal,” the Hungarian prime minister said, calling De Wever’s arguments “very educational”.
“If the European Union decides to touch and take away the money of somebody else, we will not be part of that (deal), so we don’t have any responsibility in the future.” The lack of unanimity threatens to complicate what is already shaping up to be a very complicated scheme. Without the backing of the 27 member states, the Commission wouldn’t be able to use the EU budget as the ultimate guarantor. Individual countries would then need to provide guarantees based on their economic weight, adding layers on top of layers. De Wever is under no illusion. The challenge is formidable, but so is the need to support Ukraine now that the United States has removed itself from the equation.
“We are in acute problems. If Europe has to pay, and only Europe has to pay, for the Ukrainians and the war, we will need a lot of money,” he said. “I understand the appetite to eat the chicken now.”
|