London is this week hosting the first major meeting in the endless series of summits now centered on the war in Ukraine. Volodymyr Zelensky will fly to a meeting on December 8th Friedrich Merz from Germany, Emmanuel Macron of France and Sir Keir Starmer of Great Britain. The leaders of the so-called E3 have recently become the main axis of European decision-making. But the most urgent decisions about Ukraine’s future will be made this week in Brussels, not as the seat of the European Union institutions but as the capital of Belgium.
On December 3, the European Commission presented a long-awaited proposal for use Frozen Russian assetsOf which some 210 billion euros ($245 billion) will flow in Europe to finance a loan to Ukraine, initially 90 billion euros but perhaps ultimately much more, that will allow it to finance its government and its war effort for at least the next two years. Without further aid, Ukraine is expected to run out of money in March or April. Belgium, where most of the assets are located, rejected the idea from the start, and in recent weeks its opposition has only intensified. Whether Ukraine gets its loan depends largely on the major EU countries convincing the Belgians to reach an agreement with the Commission, in what is quickly becoming a sort of Brussels-versus-Brussels cage fight.
It’s not clear what could change minds Bart DeweverPrime Minister of Belgium. Their biggest concern is that their small country will end up having to pay the 185 billion euros in frozen Russian assets currently held by Euroclear, a Belgium-based financial clearinghouse, if Russia tries to recover them after sanctions are lifted. The EU says its plan avoids this problem: banks with Russian assets would have to loan an equivalent amount (interest-free) to the EU, which would in turn loan it to Ukraine and be responsible for repaying the banks. The bloc as a whole would assume the risk.
The EU’s brilliant idea is that Russia will eventually have to hand over its post-war reparations balances to Ukraine in order for sanctions to be lifted. However, Mr De Wever fears that some EU member states (perhaps pro-Russian Hungary) could veto the continuation of sanctions without Russian reparations. This would give Russia the opportunity to demand the return of its assets.. However, the plan would make it impossible for any country to lift the sanctions by relying on a different basis for maintaining them – an EU economic emergency clause never before invoked in such complex circumstances – that requires only a qualified majority of member states.
However, Mr De Wever is also concerned that Russia could retaliate against Belgium in other ways. And some experts say the legal logic of the plan is questionable. It is not clear that covering the loan to Ukraine in itself constitutes an economic emergency for the EU: it amounts to perhaps 1% of the bloc’s GDP. In any case, he has so far failed to convince Mr De Wever, who argues that there are other financing mechanisms for Ukraine, including financing backed by the EU balance sheet. The prime minister comes from a right-wing party, the New Flemish Alliance, which nominally supports the secession of Flanders. His opposition to the Commission’s asset freeze proposal is widely supported in Belgium. When Mr De Wever addressed Parliament on this issue on December 4th, No opposition party opposed him..
European diplomats fear that Mr. De Wever is so entrenched that he will find it difficult to move forward. Mr. Merz, the head of state who appears to be most enthusiastic about the reparations loan plan, traveled to Brussels on December 5 with the head of the European Commission to have dinner with the Belgian. Ursula von der Leyen. But so far, a deal appears as elusive as ever. The United States is actively lobbying against this, arguing that the return of assets should be used as an incentive to persuade Russia to support a peace deal. If Europe fails to solve the problem soon, Ukraine is facing a real liquidity crisis.
The agenda for the meeting in London has not been publicly announced but is expected to focus less on the issue of frozen assets and more on responding to recent changes in U.S. and Russian diplomacy. A Ukrainian government source described her as “support association” for Ukrainian and European leaders who have been repeatedly harmed by US initiatives in the last two months. Vladimir Putin Last week he rejected the latest US-Ukrainian version of a peace proposal presented to him by US special envoy Steve Witkoff during a visit to Moscow. European officials are hesitating whether to remain calm as Russia takes blame for the stalled peace talks or worry about what the United States might propose next.
The proposal to use frozen Russian assets to finance a large EU loan that will provide financing opportunities for Ukraine in the coming years has become a crucial test of European resolve. For the time being, governments must continue to approve money from their own budgets, several million euros each. Just last week, Germany spent 100 million euros to repair Ukraine’s energy infrastructure and the Netherlands sent 250 million euros to buy weapons.. Northern European governments, which disproportionately provide this aid, are increasingly upset that the burden is not being shared across the Union.
With its current legal justification, the EU could enforce the asset freeze plan even without the Belgian agreement, but at the risk of deep internal division. The proposal must be approved at a summit scheduled for December 18. If that fails, some governments are considering issuing common EU debt to provide a bridge loan to Ukraine. Until then, European leaders will be racking their brains to find a way to convince Mr De Wever to accept it.
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