Meeting informally in Copenhagen on Wednesday 1 October, the heads of state or government of the countries of the European Union will discuss the preparatory work for granting Ukraine a new macro-financial loan (‘Reparation loan’) from the EU, this time to the tune of €140 billion, to cover its military expenditure and budgetary needs (see EUROPE 13720/1).
In particular, the EU27 will be asked about the possibility of renewing, by a qualified majority of Member States - and no longer unanimously - the European sanctions against Russia for its military aggression against Ukraine, according to the note that the European Commission sent to the ambassadors of the Member States (Coreper) last Friday, a copy of which Agence Europe has obtained (see EUROPE 13719/12).
Changing the decision-making procedure would increase the likelihood that European sanctions would not be lifted before Russia paid war reparations to Ukraine, and therefore that the Member States or the EU would not have to intervene to honour Russia’s claim on Euroclear, the Belgium-based clearing house where assets held by the Bank of Russia are frozen, generating cash of up to €185 billion.
This would also make it possible to circumvent a possible veto from countries such as Viktor Orbán’s Hungary, which often makes its support conditional on other measures in favour of his country. There is no guarantee that Robert Fico’s Slovakia, or even Andrej Babiš’s Czech Republic (if he wins the general election in October), will not one day block the renewal of sanctions against Russia.
The structure devised by the Commission is complex. The EU would enter into “a tailored debt contract with Euroclear at 0% interest”, subject to a change in investment rules for central securities depositories, according to the note. In exchange, the accumulated cash would be used to finance the future loan to Ukraine that it would repay to the EU via the war reparations that Russia will have to pay, in accordance with the European Council’s position on the duration of the holding of immobilised Russian public assets. Ukraine’s repayment to the EU would enable the EU27 in turn to repay Euroclear, which would be in a position to honour the Russian debt when the European sanctions are lifted.
“Critically, this whole operation would not affect Russia’s sovereign assets (i.e. the claim on Euroclear) and would be temporary”, stresses the Commission.
Since the Member States’ guarantees would be activated if Euroclear had to honour the Russian debt before repaying the loan to Ukraine, the Commission will be seeking political support “from all or most of the Heads of State or Government”, on Wednesday, to facilitate the extension of European sanctions against Russia.
Of the €185 billion in cash generated by Russia’s public assets, around €45 billion would be used to guarantee the €50 billion in loans that the EU and G7 countries are already granting to Kyiv.
The Commission does not specify the envisaged duration of the future ‘Reparation loan’.
See the Commission’s note: https://aeur.eu/f/ios
On Tuesday 30 September, Finland and Sweden gave their support to the European Commission’s initiative for a future loan to Ukraine, “using frozen Russian assets as much as possible”, so that Kyiv would be able to “cover its most urgent medium-term budgetary and military needs for 2026 and 2027”.
“As the European Council has already confirmed, Russian assets should remain frozen until Russia ends its war of aggression and compensates Ukraine for the damage caused by this war. It is key that the loan granted to Ukraine should only be repaid once it has received war reparations from Russia”, they added in a joint statement.
Both the two Scandinavian countries and the Commission believe that the future loan should also generate spin-offs for the European defence industry, in particular through synergies with the Ukrainian defence sector.
See the statement by Finland and Sweden: https://aeur.eu/f/iot (Original version in French by Mathieu Bion)