Brussels – The question of what to do with Russian state assets frozen on European soil has been on the agenda in Brussels for some time. It is a decidedly political issue with strong legal and economic implications. Now, however, faced with Ukraine’s enormous needs—an estimated €52 billion in budget support and €80 billion in military assistance until 2027—and the gradual disengagement of the United States, the European Commission has decided to take action.
At the informal Copenhagen summit, it received an initial endorsement in principle from the heads of state and government of the 27 to work on a legislative proposal. The aim is to use the €175 billion owned by the Russian Central Bank, but mostly kept by Euroclear in Brussels, without any legal confiscation. The terrain is tricky, but—said a senior European Commission official—”we believe we have found a way to do it without violating international law.”
At the basis of the reasoning, Brussels cites the conclusions of the European Council of a year ago, which stated in black and white that “Russia’s assets should remain frozen until Russia has ceased its war of aggression against Ukraine and compensated it for the damage caused by that war.” This principle, in essence, is the security guarantee on which the complex contrivance in the pipeline rests, together with the fact that, as a senior official explains, the EU would not touch the claim that Moscow holds on the Belgian financial services company, but rather the cash that has accumulated over the past three and a half years. “The cash belongs to Euroclear,” Brussels argues.
The idea then is for Euroclear to invest this cash in a dedicated debt contract for the Union, and for the latter to lend it to Ukraine at zero interest and in several tranches “as needed.” Kyiv would repay the loan only once the war is over and Russia has paid reparations. At that point, Brussels would in turn repay Euroclear. A “reparations loan”, as Ursula von der Leyen called it in her State of the Union address last 10 December.
In order for the construction to hold, “we would need guarantees from the Member States,” a senior official further explained. Guarantees issued bilaterally, totalling 175 billion, with a structure similar to the one implemented with the 100-billion SURE fund triggered in 2020 during the Covid-19 pandemic. According to the Commission, the risk of such guarantees would remain “limited” and “under the control of the Member States.” That is, it would only materialise in the event that the 27 decide to lift sanctions on Russia—and thus unfreeze its state assets—without Moscow having compensated Ukraine.
That is why, together with the proposal for the use of assets, “it is important to change the sanctions regime to avoid an accidental release.” Here lies perhaps the most delicate passage. In essence, to minimise the risks for member states, the European Commission is considering eliminating the unanimous vote for the extension of sanctions, which is held every six months. “We would not propose this if we did not think it was possible,” assures the source. The possibility is allowed by Article 31 of the Treaty on European Union, which stipulates in point 2 that the Council of the European Union may act by qualified majority in foreign policy and thus also in sanctions matters. The EU executive’s assessment is that the sanctions regime itself can be altered by circumventing the unanimity requirement.
Among the 27, who in Copenhagen gave timid support in principle to the Commission, scepticism is not lacking. The first to put the brakes on is the Belgian Prime Minister, Bart de Wever, who is worried about the substantial part of Russian resources tied up in his country. France also calls for calm. “Europe must remain an attractive and reliable place,” President Emmanuel Macron emphasised, stressing the importance of getting things right at the informal summit. “If there are rules, they must be respected.” Denmark and Latvia recalled the legal aspect of the issue but expressed confidence that the Commission could find a balance and awaited the proposal from the EU executive.
There are other risks: Putin has already signed a decree that would allow him to confiscate foreign assets in Russia, and a problem of financial credibility and confidence in the markets and the euro should not be underestimated. For now, the European Commission intends to proceed. The heads of state and government will reopen the issue already at the next European Council on 23–24 October. If they indeed give a mandate to the executive to present a legislative proposal, Brussels’ aim is to dispel any doubts and put an unassailable scheme on the table “at the beginning of the second quarter of next year“—around the fourth anniversary of Russia’s aggression in Ukraine.
English version by the Translation Service of Withub
