Summary of the EU’s Plan to Use Russian assets for Ukraine & Current Obstacles
This article from the financial Times details a complex and contentious plan by the European Commission (EC) to leverage approximately €140 billion in frozen Russian assets to provide a loan to Ukraine. Here’s a breakdown of the key points:
The Plan:
* Loan with Conditions: The EC proposes a loan to Ukraine secured by the frozen Russian assets. Russia woudl retain ownership of the assets and could reclaim them if they agree to pay war reparations to ukraine. This is intended to avoid accusations of asset confiscation.
* Dual use: The EC suggests the loan funds be used for both military aid and broader budget support for Ukraine.
* Extended Sanctions: To keep the assets frozen throughout the loan period, the EC proposes shifting from a system requiring unanimous (all 27 countries) approval every six months to extend sanctions, to a system using a qualified majority vote. This aims to circumvent potential vetoes, notably from Hungary.
Obstacles & Concerns:
* France’s Hesitation: France is a major roadblock, demanding the scheme be legally sound, ensure fair risk distribution, and not negatively impact its financial system. They want guarantees against asset confiscation.
* Belgium’s Concerns: Belgium also wants a complete leveling of risks and legally binding guarantees.
* Euroclear’s Caution: Euroclear, the custodian of the assets, emphasizes the need to avoid any loss of confidence in international financial markets and maintain legal certainty.
* Debt Burden: There’s concern about how national guarantees for the loan would be treated in terms of national debt calculations. The EC is seeking certification from the EU Department of statistics to classify them as conditional liabilities, avoiding an increase in national debt.
* Market Reaction: There’s fear that credit rating agencies might downgrade countries providing guarantees, making the scheme expensive.
* Hungary’s Potential Veto: The proposed shift to a qualified majority vote for sanctions extensions is designed to bypass Hungary’s repeated threats to veto sanctions, but it also raises concerns among other countries about eroding their veto power.
* Disagreement on Loan Use: Mercs (likely a typo for a country or organization) wants the loan restricted to weapons, while the EC prefers a broader submission. Ukraine wants adaptability in how the funds are used.
Overall Outlook:
The article paints a picture of a plan facing significant hurdles. While Von der Leyen hopes for support at an upcoming meeting,a quick agreement is unlikely. The core challenge, as the article concludes, is to “feed the wolf (money entering Ukraine) and keep the goat alive (no financial structure can be accused of being confiscated from its accounts).” Further discussion and negotiation are expected.
