On Friday 19 September in Copenhagen, the European Commission attempted to explain the terms of a future EU loan to finance reparations in Ukraine for the destruction caused by Russian military aggression (see EUROPE 13706/2), but without dispelling all doubts.
“We are currently working on the details” of this initiative in order to respond to “concerns” and build an instrument that is “financially and fiscally sound”, said the European Commissioner for the Economy, Valdis Dombrovskis, after the Eurogroup meeting.
He gave assurances on several occasions that the aim was not to confiscate the Bank of Russia’s assets. “This will not affect Russia’s claim on the financial institutions”, he stressed.
In practical terms, the Commission would like to use the cash balances from frozen Russian assets held essentially by Euroclear in Belgium and reaching maturity to buy certain zero coupon bonds, which will ultimately be used to raise funds for Ukraine. According to one source, guarantees from Member States will be needed to ensure that, in the event of necessity, such as the non-renewal of EU sanctions against Russia, financial institutions holding frozen Russian assets will be able to honour their commitments to the Bank of Russia.
“It is not a seizure or confiscation, as we understand it, but a substitution of a claim in cash for a claim in Eurobonds. Is that correct?”, asked ECB President Christine Lagarde speaking to the press. She reiterated the monetary institute’s concerns about “compliance with international law, financial stability and sovereignty of our currency”. She added that, “like all Member States”, they would like to see a written document to verify that the characteristics of the future loan to Ukraine – “the triggers, the liabilities and the exposure” – comply with international law.
Citing a “rather vague” proposal at this stage, Belgian minister Vincent Van Peteghem, whose country hosts the Euroclear clearing house where most of the €200 billion in Russian public assets have been frozen, said he was “a little bit sceptical”. Like the ECB, he warned against any confiscation of sovereign assets and advocated “sharing” the risks between G7 partners. Germany is not enthusiastic either.
Another feature of the future loan is that the Ukrainian authorities will repay it only after Moscow has paid reparations to Kyiv, a condition imposed by the European Council to end European sanctions against Russia. The size of the loan will depend on Ukraine’s financing needs over the next two years, which the IMF must assess as part of its own macroeconomic assistance to Kyiv. And, according to Mr Dombrovskis, several G7 partners have expressed an interest in issuing new loans to Ukraine using a model similar to the one currently being developed.
The Danish Finance Minister, Stephanie Lose, hoped that the Ecofin Council would be able to discuss this issue on Friday 10 October in Luxembourg. (Original version in French by Mathieu Bion)