BRUSSELS — Belgium has laid out its red lines for using Russian assets to fund a €140 billion reparations loan to Ukraine, including an agreement by EU countries to share all current and future risks related to the plan for an amount exceeding €170 billion.
EU capitals are racing to quell Belgium’s concerns around the loan ahead of a crucial summit of EU leaders on Oct. 23. Securing a political agreement at the summit would pave the way for the bloc to put forward a legal proposal shortly after.
Among the EU’s 27 countries, Belgium has the most skin in the game as it hosts the financial depository, Euroclear, which holds the bulk of the Russian state assets that were frozen after the country’s full-scale invasion of Ukraine in February 2022.
The Belgian government fears it will be on the hook for any legal and financial claims filed by Russia and has been loudly calling for all EU countries to guarantee the loan, which effectively means using taxpayer money to cover any costs.
“These guarantees cannot be limited to the €170 billion in cash that the Commission proposes to mobilize,” Belgian Prime Minister Bart De Wever told EU leaders during an informal summit last week in Copenhagen, according to a statement seen by POLITICO. “The potential exposure could be much higher than the nominal amount.”
Crucially, he added a further condition that “the guarantees do not automatically end when sanctions are lifted. Arbitration procedures could still emerge years later.”
The statement — a list of talking points delivered to European leaders on Oct. 1 — details the red lines that De Wever has drawn for fellow leaders and the EU executive, who are seeking workarounds to make the plan acceptable for Belgium.
These include not supporting any measure that could be interpreted as asset confiscation; legally binding, strictly enforceable guarantees that European countries would share all current and future risks for both Euroclear and Belgium; and an agreement to immediately stump up the cash if Euroclear needs to return the assets to Russia, for example following a peace deal.
“The statement by the Belgian prime minister raised lots of difficult questions and they are still being examined,” said a senior EU diplomat, granted anonymity to talk about the contents of a confidential statement. “The guarantees must be sound at the end of the day.”
The Commission proposed using €175 billion in cash that has matured from frozen Russian state assets invested in Western government bonds to fund a €140 billion reparations loan to Ukraine and repay a previous G7 loan to the war-torn country.
The cash is currently sitting idle on deposit at the European Central Bank (ECB) under the stewardship of Euroclear.
Reparation or confiscation?
In his statement to leaders, De Wever suggested that the Commission’s scheme effectively amounts to confiscation — a refutation of the Commission’s stance that its loan would not involve seizing Russia’s state assets.
“The distinction between a reparation loan and confiscation is, in reality, extremely narrow,” De Wever said. “If these assets remain immobilised for an extended period, the arrangement could be seen as a quasi-confiscation.”
He suggested the Commission’s scheme could violate Belgium and Luxembourg’s bilateral investment treaties with Russia, which were signed during the final stages of the Cold War in 1989.
The Commission has downplayed such concerns, with a senior official suggesting in a briefing to journalists on Monday that the “risks for Belgium are limited [and] we have a solid base in saying that this is not confiscation under EU law.”
De Wever also argued that the operation could prompt Chinese investors in particular to withdraw their deposits with Euroclear over fears that their reserves might also be seized in future.
In response to similar arguments, the senior Commission official suggested that “the only change we’re proposing for Euroclear is to invest [the cash deposits linked to the assets] not in the ECB but with [the Commission],” which enjoys a triple A rating.
The European Central Bank has warned against any formal seizure of assets for fear it would undermine the euro on the international stage and lead to retaliation in foreign countries.
The post Belgium lays out red lines on €140B Ukraine loan appeared first on Politico.
