European Commission President Ursula von der Leyen on Thursday defended a reparations loan to support Ukraine using the liquidity of Russian assets frozen in Europe as the “most effective way” to support Kiev, warning that alternatives include issuing bonds with regional budgets or through bilateral loans with Ukraine.
“This is the most effective way to preserve Ukraine’s defense and economy, and the clearest way to make Russia understand that time is not on its side,” the head of the community said in a speech to the European Parliament, referring to the proposal to use Russian assets frozen in the EU to finance Ukraine’s survival in the fight.
Mr. von der Leyen elaborated that this mechanism is based on cash balances of fixed assets. He explained the option the European Executive is working on to persuade Belgium, the headquarters of the Euroclear Fund where most of these assets are located, that “we will grant Ukraine the loan. Russia will pay reparations and Ukraine will repay it.”
The Belgian government claims this is a “confiscation” that will expose it to possible Russian claims, and is seeking legal guarantees that the remaining partners will support it if Russia seeks responsibility in the future.
Therefore, although the last European summit in October ordered the European Executive to develop various options for providing long-term support to Kyiv, a 140 billion reparation loan to Ukraine has always emerged as a preferred route for Brussels, and despite the legal and practical questions this scenario raises, support within the 27 countries is growing.
The city of Brussels is currently working on “options” to finance Kiev, but various European sources consulted in recent days stress that the focus is on leveraging assets to fund reparations loans, and that other possibilities are only “theoretical” solutions.
As an alternative, German conservatives elaborated that two other options include issuing government bonds. He pointed out that one way to do this is to use budgetary slack to raise funds in the capital markets, while another option is for member states to conclude bilateral agreements and raise the necessary funds themselves.
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