Using frozen Russian assets for a reparations loan to Ukraine is one of two proposals presented this Tuesday, December 3, by the community executive to resolve the delicate and complex issue of financing Ukraine in the near future. The other proposal, which is not the favorite, is a loan to be taken out by the EU to finance Ukraine, which would result in a mutualized debt between member states.
Although it does not meet the preference of most countries, this was an alternative created to face opposition from Belgium, which holds the majority of Russian assets located in the EU in its financial system and which, therefore, fears the impact of a withdrawal of that capital.
At stake for the next two years are 90 billion euros that the EU will need to mobilize for the attacked country, and which should guarantee two thirds of its financing needs until 2027, said the president of the European CommissionUrsula Von der Leyen, at the press conference that followed the collegial meeting.
According to Von der Leyen, these two proposals ensure that “Ukraine has the means to defend itself and carry out peace negotiations from a position of strength”.
More money will continue to be needed, but Brussels expects “international partners” to cover the rest.
EU officials say the two proposals are not necessarily mutually exclusive and could be combined, but they have made clear that borrowing based on frozen assets is the favored option – despite strong opposition from Belgium, home to most of Russia’s immobilized wealth.
A formal stance from Brussels was long awaited as Ukraine’s liquidity problems worsen, Russia intensifies fighting and the EU realizes it is alone against Russian expansionism, with the United States withdrawing from the scene.
Now, theEU leaders must meet in council within two weeks to give their approval or not to this financing plan. Shortly after the presentation of the legal text, the Portuguese Minister of Foreign Affairs, Paulo Rangel, revealed, from Brussels, that Portugal has an “open position in relation to both proposals”, although he has not yet had the opportunity to read the document, he stressed. Portugal had already “generally” supported the loan solution based on the mobilization of frozen Russian assets, to which it could contribute close to 2.5 billion euros in guarantees, but it also admitted issuing common debt.
In October, leaders failed to reach agreement on a proposed “reparations loan” for Ukraine using Russian assets, but the issue is increasingly urgent with Kiev expected to run out of money from next spring.
EWhile the first option would involve taking advantage of the EU’s budgetary margin as a guarantee for Brussels to go to the markets and mobilize such an amount in favor of Ukraine, the second would mean taking out loans from community financial institutions that hold fixed balances of assets from the Central Bank of Russia, amounting to 210 billion euros.
This last loan would be repaid after payment of reparations from Russia to Ukraine and, given the legal reserves of Belgium (where much of Russia’s wealth is located), it would be accompanied by a solidarity mechanism in the Union.
“With Russia continuing to demonstrate no willingness to commit to a fair and sustainable peace, the pressure on Ukrainian resources continues to increase, making the EU’s continued support even more vital”, argues the community executive, at a time when negotiations are taking place mediated by the United States.
The institution claims to be ready for “rapid progress” in discussions with European co-legislators (countries and MEPs) on the proposals made today, and it is up to EU leaders, meeting at a European Council in Brussels in two weeks, “to seek to reach a clear compromise on the way forward”.