European leaders agree to fund Ukraine for 2 years but using Russian assets poses a major test
BRUSSELS (AP) — Almost four years into Russia’s war full scale war about Ukraine, European Union leaders to have committed to financing One way or another, Kiev’s economic and military needs for the next two years. Ukraine is desperate and needs money in early 2026.
At the summit next week, 27 EU leaders will consider whether to use tens of billions of dollars for this purpose. frozen Russian assets Organized in Europe to help meet Ukraine’s needs International Monetary Fund It is stated as 135 billion euros (157 billion dollars).
Such a move has never been made before and it brings with it risks. The European Central Bank has warned that if Europeans appear willing to buy other countries’ money it could undermine confidence in the euro currency. Some member states are also concerned about receiving invitations to retaliate from Russia.
Belgium, where most of the assets are held, is the plan’s main opponent. It is feared that Russia will retaliate through litigation or more nefarious means. A series of drone incidents near airports and military bases last month suggested the Kremlin was already doing this, but those responsible were never publicly identified.
European Council President Antonio Costa, who will chair the summit on December 18, insisted that leaders should not leave the EU headquarters in Brussels until they reach a decision.
Two options await discussion
EU leaders froze money, most of it in Russian Central Bank assets, due to the war Putin started in February 2022. Moscow described the plan as “theft”.
Two plans emerged. The first would be a “compensation loan” that would use Russian assets until Moscow agrees to pay for damage to Ukraine. Few people think that Russian President Vladimir Putin will agree to pay compensation.
Plan B would be for the EU to borrow from financial markets, just as the bloc has done to finance a massive financing. stimulus loan plan European economies after the coronavirus outbreak.
Many of Europe’s major economies are cash-strapped and mired in debt. But Russia’s war against Ukraine poses an existential threat to the bloc. Intelligence assessments of Putin could start a war somewhere else It needs to beat Ukraine within three to five years.
Assets constitute a significant portion of the cash potentially available for use.
The European Commission, the EU’s executive body, estimates that 210 billion ($244 billion) worth of frozen assets are currently held in Europe. The vast majority – about 193 billion euros ($225 billion) as of the end of September – is held in the Belgian financial clearinghouse known as Euroclear.
It also has political advantages. If the EU chooses to use the assets, only a “qualified majority” of countries (about a two-thirds majority) would be needed for the green light. Borrowing from financial markets would have to be approved by everyone, meaning even a single no vote would defeat the idea.
Last year in Hungary Blocked EU support to Ukraine at almost every opportunity. within the government Slovakia at the same time he begins to dig in his heels. A new, fiercely nationalist leader in the Czech Republic could further complicate the decision.
It is in the interest of the vast majority of member states to avoid the veto.
Details of compensation loan
European Commission President Ursula von der Leyen, who announced her plan on December 4, said that the EU will meet two-thirds of Ukraine’s needs for 2026 and 2027, a total of 90 billion euros ($105 billion). International partners will fill this gap.
Cash balances have accumulated at Euroclear due to EU sanctions on Russian assets. Interest of around 3.9 billion euros ($4.5 billion) has been generated this year, according to Euroclear, and the amount is currently being used to finance the Group of Seven credit plan For Ukraine.
Under the new plan, some of the cash will be transferred to an EU debt instrument. Ukraine will owe money to the EU, but will only repay it after the bloc’s sanctions are lifted and Russia agrees to pay war reparations.
The Commission insists there was no “theft” as Russia claims, because the Russian Central Bank’s right to claim its money and Euroclear’s obligation to repay will remain intact.
When Putin pays the war reparations, Ukraine will pay its debt to the EU, the EU will pay its debt to Euroclear, and Euroclear will pay its debt to the Central Bank of Russia.
Opposition from Belgium
More importantly for Belgium, the plan includes measures to ensure that risks are shared by its partners. Other EU countries will offer to guarantee the loan if something goes wrong. Germany has already signaled this.
However, the Belgian government was not appeased. Even before the Commission’s compensation loan plan was made public, Foreign Minister Maxime Prévot said it “consequently involves economic, financial and legal risks.”
Prévot said Belgium, a strong supporter of Ukraine and providing military and financial support, felt its concerns were not heard by its EU partners.
“We are not trying to antagonize our partners or Ukraine. We are simply trying to avoid potentially disastrous consequences for a member state that is asked to show solidarity without being offered the same solidarity in return,” he said.
Euroclear CEO Valerie Urbain also said in an interview with Belgian public broadcaster RTBF last week that the court order could not be ignored if the EU forced the clearinghouse to transfer its assets in Russia.
