The European Commission will provide Belgium with sweeping guarantees to unblock a controversial reparations loan for Ukraine, Ursula von der Leyen has said, forging ahead with the plan despite risks deemed “disastrous” by Belgian authorities.
The guarantees, outlined in legal texts presented on Wednesday, consist of bilateral contributions by member states, a backstop by the EU budget, legal safeguards against retaliation and a new prohibition on transferring sovereign assets back to Russia.
It is the boldest and most comprehensive attempt by the Commission to overcome Belgium’s resistance before a crucial EU summit on 18 December. Ukraine has said it would need a fresh injection of foreign funding as early as spring next year.
“With today’s proposals, we will ensure Ukraine has the means to defend (itself) and take forward peace negotiations from a position of strength,” the Commission president said.
“We are proposing to create a reparations loan, using the cash balances from immobilized Russian assets in the EU, with strong safeguards for our Member States.”
The reparations loan is von der Leyen’s preferred option to cover Ukraine’s financial and military needs for the next two years, estimated at €135 billion. The EU is meant to contribute at least €90 billion, with the rest backed by other Western allies which do not include the United States as it no longer provides external support.
Under the untested scheme, the Commission would channel the immobilized assets of the Russian Central Bank into a zero-interest line of credit for Ukraine.
Kyiv would be asked to repay the loan only after Moscow agreed to compensate for the damages caused by its war of aggression – a virtually unthinkable scenario.
The bulk of the assets, about €185 billion, are held at Euroclear, a central securities depository in Brussels. This means Belgium holds the cardinal vote in negotiations.
Since the start of discussions in September, Belgium has firmly demanded bulletproof and all-encompassing guarantees from other member states to shield themselves against Moscow’s scorched-earth retaliation and prevent multi-billion-euro losses.
Another key concern is that the sanctions behind the assets, which are subject to renewal by inanimity, might be derailed by a single country’s veto. A premature lifting of the restrictions would release the Russian funds and precipitate the collapse of the loan.
The European Central Bank has declined to provide an emergency liquidity backstop to help governments raise the necessary cash in that worst-case scenario.
Belgium’s unwavering resistance
Even before von der Leyen took the stage, Belgium dug its heels in.
Earlier on Wednesday, Belgian Foreign Minister Maxime Prévot said the reparations loan was “the worst” of the three available financial options to support Ukraine.
“Our door has always remained open and still is. However, we have the frustrating feeling of not having been heard. Our concerns are being downplayed,” Prévot said before heading into a ministerial meeting of NATO.
The Commission’s proposals “do not address our concerns in a satisfactory manner. It is not acceptable to use the money and leave us alone facing the risks,” he added, suggesting that he was aware of the content of the legal documents before they were made public by the head of the Commission.
Prévot said that for the loan to move ahead, his country would require guarantees that “go beyond” Euroclear and Belgium, easily exceeding €185 billion of the assets.
“We are not seeking to antagonize our partners or Ukraine,” he said. “We are simply seeking to avoid potentially disastrous consequences for a member state that is being asked to show solidarity without being offered the same solidarity in return.”
In her presentation, von der Leyen sought to address the Belgian reservations with broader guarantees backed by both member states and the EU budget, alongside legal safeguards to protect member states and financial institutions like Euroclear from having their property unlawfully expropriated by “Russian-friendly jurisdictions”.
The prospect of retaliatory expropriation was among the many questions raised by Belgian Prime Minister Bart De Wever in a letters sent to von der Leyen last week.
“These risks are unfortunately not academic but real,” De Wever said.
If no deal is found on the reparations loan, the EU will resort to joint borrowing, as it did during the COVID-19 pandemic, von der Leyen said on Wednesday.
The issuance would amount to about €45 billion for 2026 alone.
The option of common debt, advocated by Belgium, would leave the Russian assets untouched and avoid any legal pitfalls. But the idea is opposed by the vast majority of member states because of the immediate impact it would have on national treasuries.
According to the Commission, the two options unveiled on Wednesday – the reparations loan and the joint debt – are designed to meet Ukraine’s evolving financing needs in a “flexible and effective manner, irrespective of the situation on the ground, whether the country is at war or at peace.”
The Trump factor
The Russian assets, paralyzed under sanctions since early 2022, have been thrust into the negotiations launched by the United States to end the war in Ukraine.
The original 28-point peace plan, secretly drafted by US and Russian officials without European input, featured a highly controversial ideato employ the sovereign assets into investment vehicles for Washington’s and Moscow’s commercial benefit.
The model caused outrage among Europeans, who quickly closed ranks to stress that any decision under their direct jurisdiction would be for them to make.
While the draft text has changed considerably after several rounds of talks between Ukrainians and Americans, the fate of the assets remains up for grabs.
“The most sensitive things and the most difficult questions are about territories, about frozen assets,” President Volodymyr Zelenskyy said on Tuesday.
“I can’t speak on behalf of European leaders about frozen money in Europe. I can only share my view, and they can support me,” he added.
“What matters is that everything is fair and transparent. That there are no games played behind Ukraine’s back.”
In his scathing letter to von der Leyen, De Wever warned that moving forward with the reparations loan at this stage “would have, as collateral damage, that we, as the EU, are effectively preventing reaching an eventual peace deal”.
De Wever noted that it is “very probable” that Russia would not be declared the “losing party” and therefore be entitled to recover its sovereign property under EU sanctions.
“As we can expect Ukraine not being able nor willing to return the loans it has been granted on the basis of these Russian sovereign assets, it seems certain that the European taxpayer will be addressed again,” he said.
De Wever’s remarks on the peace talks were seen as out of line by EU officials and diplomats, who complained they undermined European unity vis-a-vis Moscow.
On Wednesday, von der Leyen moved to counter De Wever’s point.
“We are increasing the cost of Russia’s war of aggression. And this should act as a further incentive for Russia to engage at the negotiating table,” she said.
Ambassadors will begin discussions on the legal texts later on Wednesday, following von der Leyen’s anticipated presentation. The goal is to have a deal when EU leaders meet in mid-December for a make-or-break summit, which means a very tight timeframe.
Adding to the pressure is an $8.1 billion program that the International Monetary Fund (IMF) is meant to grant Ukraine. For the IMF to make a final decision, it will need firm commitments from European allies to ensure Kyiv’s macro-economic stability.