EU bogged down on frozen Russian assets. But time is running out for Ukraine

Brussels –

There are just a few hours to go until the summit of EU heads of state and government, the last of the year and the most enigmatic in some time. “There is only one decision to be taken,” they have repeated for days in Brussels. The one on the 90 billion funding to Ukraine for the next two years. All leaders agree: without that money, Kyiv will be forced to capitulate. But the European Commission, by insisting on the use of frozen Russian assets, has pushed everyone into a dead end. And now the stalemate seems total. 

To unblock it, the President of the European Council, Antonio Costa, “is ready to use all the means at his disposal,” a senior official guarantees, which, from a logistical point of view, means prolonging the summit indefinitely, at least until Friday or even Saturday. As to how the impasse will be broken, however, no one can make any predictions. 

The fact is that the legal proposal on which the diplomacies of the 27 have been working for days is only one, the only one put on the table last 3 December by the Commission, which envisages the use of Russian assets frozen in the Belgian company Euroclear and—to a much lesser extent—in several commercial banks in some EU countries to finance the maxi loan to Ukraine. Kyiv would only have to repay this reparation loan, as Ursula von der Leyen called it, once (and assuming) Moscow repays the war reparations (which in the history of Europe would be exceptional).

The Commission chose to insist on this path—initially, there were three options, including bilateral grants and a loan financed by the EU budget—for several reasons. To make its voice heard with Moscow, so that assistance to Kyiv would not burden the coffers of the member states, but above all because it was considered, at the count of votes, the only viable one. While a common debt instrument would require an amendment of the budget and thus a unanimous yes of the member states, for the use of Russian assets, Brussels is ready to proceed by qualified majority. 

“From the very beginning, it was clear that unanimity would not be possible, so work continued only on the repair loan. It is no secret that this is the solution preferred by a significant majority of the member states,” admitted a diplomatic source. The problem is that, along with Belgium’s strenuous opposition—the €185 billion held by Euroclear is equal to almost a third of the country’s GDP, and therefore the financial risk is enormous—doubts and concerns from other member states have surfaced. When last week it was decided—using Article 122 of the Treaty, which overrides unanimous decisions—to prepare the indefinite freezing of Russian assets, Italy, Bulgaria, and Malta, together with Belgium, signed a declaration in which they again called for alternatives to be explored. 

According to another diplomatic source, the real conflict is not between Belgium and the others, but “between those who are against common debt-based models and those who would be in favour.” And indeed, he goes on, “it is no coincidence that the biggest supporters of borrowing with Russian assets are Germany and the Netherlands, followed of course by all the frugals.” Some question the interpretation given by the European Commission on unanimity and qualified majority: the very same Christine Lagarde, president of the ECB, is said to have suggested to the ministers of the 27 that if Article 122 can be invoked for a decision on assets, then it can also be invoked to change the room for manoeuvre of the EU budget. One source speculated that the applicability of Article 122 will be “one of the main discussions tomorrow.” 

Not least because a short circuit is materialising: no one wants to proceed without Belgium on the repair loan. Still, if Belgium were to get on board with all the guarantees demanded by Prime Minister Bart de Wever, then many other countries could pull out. And at that point, the system of guarantees envisaged by the Commission would collapse. Belgium is asking for open-ended guarantees, also in terms of the figure. “If it were to get them, they would be difficult for many countries to accept,” admits a diplomatic source. Yet if the buck were in the hands of any other capital, “we would probably do the same thing.”

Given the scenario, the rumours about US pressure (denied by most, however) on the most “aligned” countries (Italy and Hungary in the lead) to stand in the way of the assets add little. The European Union has entangled itself, and unravelling the skein tomorrow will not be easy. “The only certainty is that we all want to find a solution,” assures a senior official. The risk is that the leaders will have to start from scratch and bring some “creativity” to it. At that point, there would be two certainties: what starts tomorrow will be a very long end-of-year summit.