Key Highlights
- The European Union has agreed to an indefinite freeze on Russian assets worth up to €210 billion held in the EU.
- The frozen assets are primarily located in Belgian bank Euroclear and will be used as part of a loan plan for Ukraine, valued at €90 billion.
- Belgian Prime Minister Bart De Wever is concerned about legal risks and potential financial liabilities if the plan goes wrong.
- Russian officials have accused the EU of theft and filed suit against Belgian bank Euroclear in Moscow.
The EU’s Plan to Use Russian Assets for Ukraine’s Recovery
The European Union has taken a significant step towards providing financial support to Ukraine, backing an indefinite freeze on Russia’s frozen cash. This move is part of a broader strategy aimed at leveraging assets that have been immobilized since the start of Russia’s full-scale invasion of Ukraine in February 2022.
Background and Context
Ukraine’s President Volodymyr Zelensky has consistently argued that it is “only fair” to use Russia’s frozen assets to rebuild his country. The EU is working towards a loan plan worth €90 billion, which would cover two-thirds of Ukraine’s estimated need for funding over the next two years, amounting to about €135.7 billion.
Legal and Financial Implications
The decision comes after almost four years of conflict, during which time Ukraine has been running out of cash. Brussels is hopeful that this plan will be approved at next week’s EU summit in Brussels. However, the plan faces significant opposition from Belgium, where Prime Minister Bart De Wever has set a series of “rational, reasonable, and justified conditions” before he will accept the reparations plan.
Belgium holds €185 billion of Russian assets frozen within its borders, primarily through Euroclear.
The European Economic Commissioner Valdis Dombrovskis stated that EU financial institutions are fully protected from any legal proceedings initiated by Russia. However, Belgium remains cautious, with De Wever warning of potential financial risks and the possibility of legal action.
International Reactions and Concerns
Russian officials have not only accused the EU of theft but have also taken legal action against Belgian bank Euroclear in Moscow. The Russian Central Bank has filed a lawsuit, seeking to challenge the legitimacy of the EU’s loan plan. Meanwhile, Belgium is concerned about being left with an enormous financial burden if things go wrong.
Veerle Colaert, a professor of financial law at KU Leuven University, expressed worries that using Euroclear could “destabilize the international financial system” and violate EU banking regulations. She emphasized that Belgian GDP is approximately €565 billion, making the potential €185 billion bill a significant concern.
EU’s Strategy and Next Steps
The European Union believes it can secure sufficient guarantees for the loan itself but remains wary of exposing Belgium to extra damages or penalties. The EU’s executive branch is confident that they have addressed all legal concerns, but the plan still requires approval from other member states.
At next week’s summit, EU leaders will be working to finalize the details of this ambitious plan. Seven key EU member states, including those closest geographically to Russia such as the Baltics, Finland, and Poland, are pushing for a swift resolution. They believe that immobilizing Russia’s assets indefinitely is “the most financially feasible and politically realistic solution.”
While Russia remains adamantly against touching its frozen assets, there are growing concerns among European figures that the United States may have different plans for these funds as part of its own peace initiatives.
Conclusion
The decision to indefinitely freeze Russian assets in the EU is a crucial step towards providing financial support to Ukraine. However, it faces significant challenges and opposition from key players such as Belgium. The success of this plan will depend on careful negotiation and addressing all legal concerns to ensure its long-term viability.
