Russia is intensifying its threats of retaliation against the European Union, its member states and its companies in an attempt to prevent the Union from financing kyiv through billions in Russian sovereign assets, which remain frozen on Community territory due to sanctions imposed in the Kremlin’s orbit for invading Ukraine. The Central Bank of Russia demanded that this money be frozen at Euroclear, the private settlement and clearing company that holds the securities, where approximately 185.00 of these funds are stored. Moscow accuses Euroclear – based in Belgium and which holds sovereign assets on Russian soil and in other states – of “illegal actions” which prevent the Russian central bank from “disposing of its funds and its values” and demands damages and perjury.
At the same time, a large majority of member states approved the arrival of an emergency mechanism aimed at keeping Russian funds frozen under sanctions indefinitely and that this sanction does not have to be renewed every six months, as if it were only now. This procedure, originally designed to respond to natural emergencies or pandemics and approved by majority rather than unanimously, constitutes the first step to unblock the flow of funds to Ukraine and obtain possible vetoes from countries linked to the Kremlin, such as Hungary.
A few days ago, the Kremlin said it would consider “a casus belli” (reason of war) that its funds be used to finance kyiv. But, for the moment, its fight is channeled by legal means. Its request, the appeal of which is uncertain because it was brought before an arbitration court in Moscow, is in reality the first concrete attack by Moscow against European entities for the use of these funds. But it is perhaps not the only one: Russia has promised to pursue the EU by all possible means. The European Commission, however, considers that the risk is very limited because its legal proposals include guarantees for countries.
The Kremlin’s move coincides with the increasingly heated debate within the EU over the possibility of handing over a large part of these Russian sovereign funds present in Euroclear to kyiv in the form of a public interest “reconstruction loan”, which Ukraine should only return if Moscow agrees to pay for the damage caused by the war, once a peace agreement is signed.
This is a formula which, at a time of adjusted assumptions across Europe, would make it possible to finance kyiv quickly without Member States having to make new disbursements. However, Belgium, the country where Euroclear and the majority of these funds are located, opposes this. The Belgian government complains that there is a mutual risk and that all partners respond if they have to pay later to Moscow.
In October, “EU leaders pledged to keep Russian assets tied up until Russia ends its war of aggression against Ukraine and compensates for the damage caused. Today we honor this commitment,” said António Costa, President of the European Council, in his account of
The leaders of European institutions believe that Belgium’s concerns are legitimate, but also that Moscow’s demands are final. However, the EU sanctioned Russia during the first weeks of the invasion, punishment which resulted in the immobilization of its sovereign assets deposited in several countries with entities like Euroclear (which owns the most) and in private banks. This money – worth thousands of millions held by Euroclear – is what Brussels wants to use to issue an interest-only loan to keep Ukraine afloat.
If the idea of a reconstruction loan with frozen Russian assets is accepted at next week’s EU summit, as would be the case for a majority of European states and the European Commission, it would be one of the most significant measures against Russia and in support of Ukraine since the start of the full-scale invasion four years ago.
However, overall it’s okay. The fear of reprisals from Moscow against European companies that still do business in Russia despite the war is great. At this point, the possibility of eternal and costly litigation comes to the fore. The Central Bank of Russia warned in a statement this week that it would unleash all kinds of retaliation if it were free to plan the use of its assets for the “reconstruction loan” or if it employed any other indirect formula involving its funds. The Kremlin also promises to help all types of courts, local, national and international; including those of all EU and UN member states.
The reaction of the US administration of Donald Trump also plays an important role. Washington has its eyes on this money that is on European soil and, in the 28-point Russian-American peace plan (developed without kyiv and without Europeans), it has begun to propose investing it in the reconstruction of Ukraine but through American companies.
Currently, Casa Blanca has spoken with some of the European governments most willing to try to end the “reconstruction loan” plan. However, with an unusual formula that will grant emergency powers to the European Commission to keep Russian funds frozen indefinitely (instead of renewing the sanction that immobilizes them every six months), the EU seeks to prevent this group of countries, including Hungary, from being able to veto the decision. The United States also needs to reach an agreement with Russia to use this money.
Meanwhile, European diplomatic contacts are intensifying in a race to find a peace plan acceptable to Ukraine, in the face of American prisons, pushing kyiv to accept formulas that will benefit Russia, which has not yet shown signs of willingness to move forward with a pact to end its imperialist war. This evening, Ukrainian President Volodymir Zelensky will travel to Berlin to meet conservative Friedrich Merz. Other European leaders (like British Prime Minister Keir Starmer) and the highest EU institutions will join the conversation days before a decisive step in Brussels for Ukraine’s future.
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