Ukraine crunch-time: Europe caves to Russia's threats
But the Kremlin should hardly be popping the champagne corks
Russia’s threats have paid off. After 16 hours of negotiations, European leaders have baulked at taking Moscow’s frozen assets and using them to fund Ukraine’s survival.
The European Council, comprising the bloc’s leaders, met into the early hours of Friday morning to thrash out a solution to financing Ukraine’s self-defence against Russia’s illegal invasion, which Vladimir Putin launched in February 2022.
The European Commission had proposed a reparations loan, whereby Ukraine would be able to use some of the €210 billion that Western jurisdictions froze after the invasion of Ukraine.
The money would be given to Kyiv to finance its war-shattered economy and would be repayable only when the Kremlin agreed to pay reparations for its war.
But this idea was heavily opposed by Belgium, where Euroclear, the securities depository which holds most of the assets, is located.
As La Libre reported earlier this month, Belgian Prime Minister Bart De Wever said: ‘Moscow has let us know that if his assets are seized, Belgium and I will feel it pass for eternity.’
The shockwaves caused by the White House’s anti-European and anti-NATO National Security Strategy, and the Moscow-authored ‘peace plan’ initially co-opted by the Trump Administration that proposed Russia and the United States carving up the assets for themselves, contributed to Brussels’ belief that now was the time to break glass in emergency and take the gargantuan risk.
Hawkish countries in the Baltics and NATO-ally Britain, which left the European Union after the 2016 referendum, backed the proposal.
Ukraine’s Volodymyr Zelensky told leaders to resist Russian pressure.
‘I know that Russia is intimidating different countries over this decision. But we should not be afraid of these threats – we should be afraid of Europe being weak,’ Zelensky said.
But in a blow for EU Commission President Ursula von der Leyen and the more recent convert to the reparations loan concept, German Chancellor Friedrich Merz, leaders who signed up to the Kremlin’s school of thought prevailed.
De Wever led the charge, describing the reparations loan as an ‘emotionally satisfying’ but ultimately bad idea.
‘There’s a geopolitical motivation behind it; they want to punish Putin by taking his money, and I understand that. And certainly the countries close to Russia, who live in animosity with Russia, found this emotionally satisfying,’ he said at a news conference.
He urged those who had backed taking Putin’s assets for good, such as the Baltics, to let go of their ‘negative emotions, quickly.’
‘The enthusiasm to do it was non-existent …. At the end of the day, the enthusiasm was zero.
‘The reparation loan would have put Euroclear in uncharted and very risky, shady waters.
‘It would have given Russia an opportunity to attack Euroclear legally. It would have given them a yellow brick road to start counter-confiscations in Russia, immobilising our money.
‘[Putin] would take €17 billion of Euroclear assets immediately.’
De Wever took aim at suggestions that he was Russia’s best asset.
Kirill Dmitriev, the CEO of the Russian Direct Investment Fund, who has been negotiating the terms of a peace deal with the Trump Administration, was jubilant.
‘Fatal blow to Ursula, Merz, Starmer & the warmongers: they burned political capital pushing illegal moves against Russia’s reserves—and FAILED,’ he said in a post on X, the Elon Musk-owned social media platform, which is banned in Russia.
‘“There’s no alternative,” they said. Apparently, there is. The whole world just watched you fail to bully others into breaking the law.’
He went to applaud Belgium and pro-Russian Hungary, the Czech Republic and Slovakia for exposing ‘the incompetence of the EU warmonger elites who pushed illegal actions, spent political capital and failed.’
He may gloat, but still the Kremlin should not be popping the champagne corks. It did not enjoy a total win. Whilst leaders caved to Russian threats, they agreed to raise €90 billion in debt via Eurobonds, backed by headroom in the European budget.
This will fund Ukraine for the next two years, providing around two-thirds of its financial needs.
‘This loan would be repaid by Ukraine only once Russia compensates Ukraine for the damage caused by its war of aggression,’ the European Council said.
And the assets remain immobilised indefinitely, meaning they can still be used as leverage as part of negotiations in both pressuring Putin to come to the table as well as any future reparations settlement.
‘We made it,’ von der Leyen said at a 3.30 am press conference. Ukraine described it as a ‘workable result.’
‘Indeed, there are moments when one should keep in mind that ‘Perfect is the enemy of good,’ Ukraine’s First Deputy Foreign Minister Sergiy Kyslytsya said.
‘It was a long night for European leaders but they were able to come up with a workable result.’
But even here, there are clouds. Three European Union member states that have Russian-friendly governments, Hungary, Slovakia and the Czech Republic, opted out.
‘Thankfully, the V[isegrad]3 cooperation is active once again: Hungary, Slovakia, and the Czech Republic have decided not to get on that train,’ Hungary’s Prime Minister Viktor Orbán said.
‘By doing so, we spared our children and grandchildren from the burden of this massive €90 billion loan.
‘Hungary’s share of the war loan would have been more than 400 billion [Hungarian forint].’
Whilst Russia’s quest to undermine European solidarity took another step forward, ultimately Europe held the line, and Ukraine has two years of financial security.
Further, with Europe having control of the assets indefinitely, there is always the potential to revisit the idea of a reparations loan should Orbán fall in elections next year.
Finally, Hungary and Slovakia had opposed the idea of Eurobonds, but in the end did not veto it, but merely opted out, showing the value of ditching the requirement for European unanimity for major decisions and Russia-proofing the Union.
Imperfect but practicable.