EXPLAINERNews|Business and EconomyWill Europe use Russian assets to fund Ukraine? Could Moscow hit back?Some European countries have raised concerns about potential legal challenges to the ‘reparations plan’ for Ukraine.
European Union leaders are deliberating on a proposal to utilize frozen Russian state assets to provide Ukraine with a $164 billion loan for post-war reconstruction. This plan has been met with both support and caution among EU leaders, following recent…
European Union leaders are deliberating on a proposal to utilize frozen Russian state assets to provide Ukraine with a $164 billion loan for post-war reconstruction. This plan has been met with both support and caution among EU leaders, following recent incidents involving drones in Denmark’s airspace.
The reparations plan was initially proposed by European Commission President Ursula von der Leyen in mid-September. It aims to use Russian assets frozen in European banks as collateral for a 140-billion-euro ($164.4 billion) loan to Ukraine. Loan repayments would be sourced from war reparations from Russia, with guarantees from either the EU’s next long-term budget or individual EU member states.
Approximately $300 billion in Russian Central Bank assets have been frozen by the US and European nations since Russia's invasion of Ukraine in February 2022. Around $246.9 billion of these assets are held in Europe, with $217.5 billion managed by Euroclear, a Belgium-based capital markets company.
International law generally prohibits the confiscation of a sovereign country’s assets, presenting a legal challenge to loaning these funds to Ukraine. Belgium has emphasized the need for a detailed plan to address potential legal obligations to return the assets to Russia.
This plan has been met with both support and caution among EU leaders, following recent incidents involving drones in Denmark’s airspace.
While some leaders, like Danish Prime Minister Mette Frederiksen and Swedish Prime Minister Ulf Kristersson, support the plan, others express hesitancy due to potential legal and financial risks. Belgian Prime Minister Bart De Wever and Dutch Prime Minister Dick Schoof have called for further clarification on the plan’s details.
The plan’s viability is under scrutiny as US financial aid to Ukraine diminishes. Experts suggest that Europe may need to proceed with the plan to prevent underfunding Ukraine and to avoid increased defense spending. NATO members have pledged to raise defense spending to 5% of GDP by 2035, which could be expedited if the situation escalates.
Moscow has denounced the EU’s plan, labeling it as “theft” of Russian assets. Kremlin spokesman Dmitry Peskov warned of possible legal actions against those involved in the asset seizure, although this would require Russia to waive its sovereign immunity.
Russia holds approximately $288 billion in foreign assets, according to data from January 2022. By the end of 2023, the value of these assets had decreased to $215 billion. The majority of these assets are foreign and private, not state-owned.
Based on reporting by Al Jazeera.