On Thursday 23 October, the heads of state or government of the countries of the European Union will take stock of the financial and military situation in Ukraine, which has been facing Russian aggression since February 2022. This discussion will take place in the presence of the Ukrainian President, Volodymyr Zelensky, but in the absence of the Hungarian Prime Minister, Viktor Orbán, who has an engagement in his country until the afternoon for the commemorations of the 1956 ‘Hungarian Revolution’.
As has been the case for several European summits, the conclusions of the European Council on Ukraine will be ratified by the twenty-six Member States, without Hungary.
The text of the conclusions on Ukraine has been stabilised, apart from the part concerning the new macro-financial loan (‘Reparation Loan’), with a potential value of €140 billion, which Europe could grant to Kyiv for the Ukrainians to honour their budgetary commitments and continue the war effort. This loan would be granted by mobilising almost €200 billion of Bank of Russia assets frozen in the EU within the Euroclear clearing house, based in Belgium. It would only be repaid by Ukraine once Russia had paid it war reparations at the end of hostilities, an approach which presupposes the periodic renewal of European sanctions (see EUROPE 13720/4).
The aim of the President of the European Council, António Costa, is for the European Council to lay down the key principles of the ‘Reparation Loan’ so that the European Commission can present a proposal as soon as possible.
According to several diplomatic sources, Belgium remains very concerned. It is calling for the loan to be backed by robust guarantees from the EU budget and/or the Member States, given that the sums involved represent more than a quarter of the Belgian budget. The problem is that Hungary is refusing to take part, pointing to the risk of Russia retaliating against national assets, and which would entail committing guarantees equivalent to its share of the EU budget.
A second difficulty lies in assessing the risks, in particular that of Russia, which has signed a bilateral investment treaty with Belgium, taking commercial and economic reprisals against Brussels in response to the mobilisation of Russian public assets.
Furthermore, the Member States are not on the same wavelength regarding the nature of the military purchases that Ukraine should make with the future loan. France is campaigning for a European preference for these purchases. “But we all know that there is some stuff that Europe cannot make with such short notice”, said a European source on Wednesday 22 October.
Finally, the EU will have to continue its efforts to ensure that its G7 partners, where Russian public assets are held, agree to grant a loan to Ukraine under the same conditions.
Military support. European leaders are also expected to stress the need to step up efforts to meet Ukraine’s urgent military and defence needs, particularly in terms of air defence and anti-drone systems and large-calibre munitions.
“It is crucial to speed up efforts to support, develop and invest more in the Ukrainian defence industry”, they will add, according to a draft of the European Council’s conclusions. According to one European source, 64% of the support given to Ukraine comes from four Member States and the United Kingdom.
Following Andrej Babiš’ victory in the October parliamentary elections, the Czech authorities and the Commission met on Wednesday to review the governance of the Czech initiative for the production of large-calibre ammunition, which reached 1.4 million units at the end of October.
Finally, condemning the intensification of Russian attacks on Ukraine’s energy sector, the European Council will call for the mobilisation of all efforts to help urgently meet immediate needs following the attacks and to strengthen the country’s preparations for winter.
19th sanctions package. European leaders are also likely to welcome the adoption of the 19th package of sanctions against Russia and reiterate in their conclusions that they are prepared to increase pressure on the country.
On the evening of Wednesday 22 October, Slovakia, which had been blocking the adoption of the package, announced to the Danish Presidency that it was in a position to lift its reservation on the 19th package. A written EU Council approval procedure was immediately launched. Unless there are any objections, the package will be officially adopted before the start of the European Council on Thursday. The new measures focus on energy, particularly LNG, the ‘shadow fleet’, finance, and trade (see EUROPE 13713/1).
Slovakia, which did not oppose the content of the package, wanted proposals to address the negative impact of the EU’s climate targets on car manufacturers and ways to combat high electricity prices before giving its approval for adoption. The letter on competitiveness from European Commission President Ursula von der Leyen is likely to provide guarantees (see EUROPE 13734/13). On Wednesday, a European source said that work on a 20th package of sanctions should begin before the end of the year.
The European Council is also expected to call for further measures to disrupt the operation of the Russian ‘shadow fleet’, including “strengthening the enforcement of environmental and maritime safety standards and stepping up cooperation with flag states” (see EUROPE 13734/7).
See the European Council’s draft conclusions of 21 October: https://aeur.eu/f/j2w (Original version in French by Mathieu Bion, Camille-Cerise Gessant and the editorial staff)