The bloc’s leaders have been pressuring Belgium for months to allow it to seize Russian sovereign wealth funds.
EU leaders are considering a highly controversial and long-developed plan to use Russian sovereign funds frozen in Belgium to finance Ukraine’s conflict with Russia.
So far, the EU has given kyiv some 180 billion euros ($208 billion). Reconstruction costs are currently estimated at approximately 480 billion euros ($556 billion). Ukraine’s economy is collapsing and it just announced a record war budget.
What is the scheme?
The EU proposes “borrow” Russia’s money (reportedly about 160 billion euros) from Euroclear, a privately owned company in Belgium, and all member states promise to return it when, as they say, Ukraine wins the war and Russia agrees to pay reparations.
Isn’t that an illusion?
He “repair loan” The idea assumes that Ukraine will win the war and Russia will agree to pay reparations. Neither of those things is likely.
How would it turn out then?
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The EU could then forgive kyiv’s debt, but would still have to pay back the money it borrowed from Euroclear.
Who would ultimately pay?
Probably the European taxpayers: it is neither a politically popular nor sustainable idea in a bloc where the extreme right is emerging electorally and Brussels imposes a militarization agenda.
And what about the bankers?
European central bankers fear a legal precedent that could undermine global financial stability, as well as destroy the euro’s reputation as a safe space.
Okay, so the EU wants to take and use Russian money held privately in Belgium. Who said what?
Belgian Prime Minister Bart De Wever, whose country hosts Euroclear, where most of the Russian assets held by the EU are located, has warned that“ there There is no free money. “There are always consequences.” “ I want your signature to say, if we take [Russian President Vladimir] Putin It’s money… we “We will all be responsible if something goes wrong.” Luxembourg Prime Minister Luc Frieden expressed similar fears.
De Wever has refused to act unless he gets 100% backing from EU members: Belgium will not support the EU’s plan to use frozen Russian sovereign assets as collateral for a massive loan to Ukraine unless the financial risks are shared among all member states.
The ECB’s Christine Lagarde has warned that breaking the law to steal Russia’s money could ruin the euro’s reputation as a stable currency: a legally controversial move could undermine the euro’s credibility, deter investment in euro-denominated assets and pose a risk to financial stability. “In my view, and with financial stability and the strength of the euro in mind, we will be watching very carefully to make sure that what is proposed is in accordance with international law (and) takes into account financial stability.” Lagarde said.
Days before the EU summit, Italy’s Georgia Meloni warned the bloc’s leaders to respect international law.
How divided is the EU?
France wants the money to be spent on European weapons and, in general, on financing the Ukrainian state. Germany wants the money to be spent only on weapons. Other EU members believe kyiv should decide how to spend the money.
Does kyiv have something to say?
kyiv itself insists there will be no restrictions on how the money will be spent, a stance widely viewed with skepticism in the EU given the risk of the money being diverted into Ukraine’s notorious corruption channels.
What does Russia think and what has it warned about?
Russia is believed to hold around €200 billion in EU funds, most of which is privately owned.
Russian President Vladimir Putin said last month that “smarter” Governments oppose the seizure of Russian assets such as“they understand that it would fundamentally undermine all principles of international economic activity and would undoubtedly cause enormous damage to the… international financial system.”
Kremlin spokesman Dmitry Peskov warned of a “boomerang” whether Russian assets are used to finance kyiv, he told reporters earlier this month that“All these plans have to do with the illegal seizure of Russian property. We are talking about theft,” Peskov told reporters on Wednesday.“ “If someone wants to steal our property, our assets, and take them illegally… they will be subject to legal prosecution in one form or another.”
“All these are steps towards the complete destruction of confidence in the principle of inviolability of property. The boomerang will hit very hard the countries that host the main depositaries and are interested in the attractiveness of investments,” he warned.
Peskov has compared the EU to a group of gangsters planning their next heist.“ All this looks like a gang: someone watches, someone steals and someone, like Belgium, shouts: ‘ Guys, come on “It’s our shared responsibility.”
What is the final result?
If the EU gets involved in what Russia considers “heist,” we could see a fall of the euro as kyiv prepares for a much longer war.
