The European Union’s plan to issue a reparations loan for Ukraine suffered a fresh setback on Friday after Euroclear, the main custodian of the immobilized Russian assets, said the proposal is “very fragile”, too unpredictable and could trigger an exodus of foreign investors away from the eurozone.
The warning comes as German Chancellor Friedrich Merz meets with Belgian Prime Minister Bart De Wever and European Commission President Ursula von der Leyen in Brussels in a bid to unblock the loan before a crucial summit on December 18.
“The proposal, as it stands, seems to have a great deal of legal innovation,” a Euroclear spokesman told Euronews in written remarks. “Such innovation raises a lot of questions. We have the impression that the construction is currently very fragile.”
Euroclear is a central securities depository where the bulk of the Russian assets are held. It is based in Brussels, making Belgium the cardinal vote in the ever-fraught debate on how to finance Ukraine’s budgetary and military needs for 2026 and 2027.
“While we support the objective to support Ukraine, this initiative could have far-reaching legal, financial, and reputational risks for Euroclear, Belgium, the European Union and its financial markets,” the spokesperson added.
Under the scheme, the European 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. Analysts suggest the chances of Russia ever agreeing to pay its neighbor reparations are close to zero.
The EU intends to cover €90 billion of Ukraine’s €135 billion financing gap for the next two years by tapping into those assets. To do so, it needs the consent of the Belgians.
The proposal, which has no precedent in modern history, has been met with serious reservations by both the Belgian government and Euroclear from the start.
Euroclear also worries that it would lack the necessary liquidity to honor its claim with the Russian Central Bank if the sanctions were lifted prematurely and member states failed to raise the €185 billion in time.
The Belgian authorities have also said they fear Russia will demand their assets be returned if they sue in court and win, leaving a gap in Belgium’s treasury equal to the size of the annual federal budget. Belgium has even suggested it could bankrupt the country.
To counter those concerns, the Commission has proposed a long-term immobilization based on a qualified majority vote to avoid a sudden halt or veto. It has also said it would provide emergency lending to capitals that fall below their promised guarantees.
But Euroclear is also concerned about the prospect of retaliation, both inside Russia, where it keeps roughly €17 billion in assets, and in Russian-friendly jurisdictions around the world. The Kremlin could seize the funds that Euroclear holds on behalf of its clients.
If this happened, the Commission says Euroclear would be allowed to tap into the assets of its Russian counterpart, the Russian National Settlement Depository, held across the bloc. But legal questions remain around this issue, too.
Euroclear worries about the legal basis of the plan
In its statement, Euroclear also notes that using Russia’s sovereign assets to issue the reparations loan could have “knock-on” effects across the eurozone and prompt an exodus of investors worried about unilateral decisions by authorities in the future.
Von der Leyen herself recognized this scenario a letter to EU leaderssaying the audacious move could be interpreted as unlawful confiscation, even though she insists the legal basis is sound and the loan is the best way forward for the bloc.
“If international investors see this mechanism as a confiscation of Russian assets, confidence in Europe could erode – impacting financial markets and increasing borrowing costs for all EU member states,” the Euroclear spokesman said.
“While the proposed reparations loan proposal may seem cost-effective, it risks becoming more expensive and could drive away foreign investment.”
Euroclear’s critical statement is set to weigh on Prime Minister Bart De Wever as he heads into a meeting with Merz and von der Leyen on Friday evening.
De Wever has repeatedly invoked the risks that Euroclear faces and has said he will not be pressured into accepting the plan, which has put him in a minority around the European Council of leaders, most of whom are favorable to the reparations loan.
Hungary and Slovakia also resist the initiative for different reasons.
“I can still determine my own position, even if there are large, strong neighbors whom I like very much and greatly respect politically, who might ask me (to do) something differently,” De Wever said in the lead-up to his meeting with Merz.
“I have only one responsibility: that is the interests of the Belgian taxpayers.”
Merz and von der Leyen have vowed to take De Wever’s concerns into account, continue high-level consultations and eventually secure his blessing before a crunch summit.
“It’s legitimate to pose questions, and it’s also legitimate to try to find answers to those questions,” a Commission spokesman said on Friday.
The clock is ticking fast: EU leaders will gather on December 18 for a make-or-break summit to decide how to meet Ukraine’s financial and military needs.
The country will need a fresh injection of foreign assistance as soon as April, according to Ukrainian authorities.
In parallel, the White House, which wants a fast deal to end the war and is holding direct talks with Moscow, is said to be looking for ways to crush the plan.
According to Bloomberg, the US has lobbied “several” member states to block the reparations loan, arguing it could end up “prolonging the war.”
Euroclear CEO Valerie Urbain echoed those words in an interview with Belgian TV.
“At this stage, that money would be better spent on peace negotiations, rather than setting up an extremely complex and risky legal structure and then losing that leverage in the negotiations,” Urbain said.
If no breakthrough is found, the EU will have to resort to the financial markets and raise €90 billion in common debt to support Ukraine, the option preferred by Belgium.