The EU itself will lend 90 billion to Ukraine, route via Russian assets fails

Ukraine gets its much-desired loan from the European Union to plug the holes in its budget. But that loan – of 90 billion euros interest-free – is financed by the EU itself, and not with the help of Russian assets housed in the EU.

European government leaders announced this outcome on Thursday night at 3 o’clock in Brussels. “We promised and we delivered,” EU President António Costa said afterwards.

As chairman of the deliberation, Costa had spent hours pushing for a different solution. His team preferred to create the loan to Ukraine using Russian assets. Ukraine would only repay that loan if Russia made reparations after the war. But this proposal has so far turned out to be a dead end, with too many doubts.

The 27 government leaders thus arrived at an alternative that had already been suggested, but which met with little enthusiasm prior to the summit. The European Commission will borrow on the capital market, using the reserves in its own budget as collateral. The money therefore comes from the EU budget – which in turn is filled by the EU countries. Hungary, the Czech Republic and Slovakia arranged an exception: their budgets will not be affected by this loan.

The result is a harsh blow for a large majority of EU countries, such as the Netherlands and Germany. Since the autumn, they have also been pushing for the use of Russian assets worth 210 billion euros, which have been tied up by the EU since the invasion, to help Ukraine financially. That was fair, they said. Russia is the reason Ukraine must defend itself and rebuild itself.

Something else also played a role in the broad preference for that option. Many countries are either strapped for cash or find that they contribute much more to support for Ukraine than other countries in the union. By using the funds, Ukraine could be helped without affecting the national budget or further throwing the internal balance out of balance.

But Belgium did not want to bow down. The country, which houses the lion’s share of the money through securities depository Euroclear, feared it would be hit hard by such an intervention. In recent weeks, Prime Minister Bart De Wever asked for numerous guarantees from his colleagues, should Russia take Belgium to court or take Belgian assets or assets in retaliation.

Acclaim

That discussion resulted in a stalemate. The coming together of the leaders should have ironed out the differences, but the opposite happened. Most were prepared to provide guarantees, but these could not be “unlimited”, as De Wever wished. Additional commitments to Belgium, which had been worked out by officials in side rooms, raised questions from others.

In recent days, De Wever has also received support from colleagues from other countries who also started to hesitate. They feared the consequences for their own banks holding Russian assets, the broader legal and financial consequences of such an unprecedented intervention or the consequences for the peace process. A large country like Italy was downright sceptical, and France also kept a low profile.

The group of countries that saw their preferred option fail can console themselves with three thoughts. One: Ukraine will get the money it needs, albeit via a different route than hoped. Two: for the countries that currently contribute a lot to Ukraine, such as the Netherlands and Denmark, an EU loan is a solution in which the costs are shared more fairly by all countries than through voluntary contributions. Three: the use of Russian assets is still on the table.

The Russian money will remain frozen for a long time, as has been previously decided. A number of government leaders and diplomats suggested that the funds could still be used to repay this loan. “If Russia does not pay reparations (…) we will use the funds to repay the loan,” German Chancellor Friedrich Merz said.

But no one knew on Thursday night how this should be practically implemented.

With the collaboration of Anouk Boone.

Give a gift





Part





Email the editor

The journalistic principles of NRC