On Thursday 23 October, the heads of state or government of the countries of the European Union, with the exception of Hungary’s Viktor Orbán, reiterated their willingness to support Ukraine financially and militarily, in particular by granting a new macro-financial loan (‘Reparations Loan’) using the Bank of Russia’s immobilised assets in the EU, but without going so far as to confiscate them.
“Nobody vetoed nothing today. We have taken the most important political decision”: to ensure that Ukraine has the financial resources to “fight for a just and lasting peace”, declared the President of the European Council, António Costa, at the end of the summit.
The twenty-six EU leaders are committed “to meeting Ukraine’s urgent financial needs for 2026-2027, including its military and defence efforts”. They call on the European Commission to present “options for financial support, as soon as possible”. They will be meeting on 18 and 19 December to take stock of the situation.
The references in the provisional versions of the European Council’s conclusions (see EUROPE 13736/2) to the legal arrangements for making the most of the immobilised Russian assets have disappeared from the text agreed by European leaders.
Some consider that the use of the term ‘options’ broadens the field of possibilities, rather than limiting financial assistance to a single legal arrangement. However, according to the President of the European Commission, Ursula von der Leyen, the “focus” remains on the legal arrangements initially envisaged by the Commission. This arrangement assumes (1) that Ukraine repays this loan only after Russia has paid war reparations, and (2) that EU sanctions against Russia are maintained (renewed unanimously by the Member States every six months) until Russia compensates Ukraine.
The discussions identified “technical and legal issues” that needed to be clarified, said Mr Costa. He noted that, according to the Presidents of the ECB and Eurogroup, “the proposal respects international law” and the questions raised can be resolved.
Guarantees. Belgium, the home of the Euroclear clearing house, which holds the vast majority - €185 billion - of frozen Russian state assets in the EU, has issued a serious warning to its partners about the risks associated with the proposed legal arrangement.
Its Prime Minister, Bart De Wever, pointed out that “even during the Second World War, immobilised assets were never touched”. “So if we want to do it, you need to tell me what rules we’re basing it on”, he added.
On his arrival, he set three conditions, which are still valid, for his country to agree to the exploitation of frozen Russian assets: - the pooling of risks in the event of retaliation by Russia; - a guarantee that the Member States will become financially involved in the event that Russia’s claim on Euroclear has to be honoured; - every EU and G7 country holding frozen Russian assets will have to take a similar approach.
“If I were the Belgian Prime Minister, I would have made the same arguments. At the end of the day, responsibility will have to be assumed by the Member States, or perhaps the whole EU”, said German Chancellor Friedrich Merz.
According to a note from the European Commission, around €25 billion of the Bank of Russia’s assets are immobilised in other EU countries. However, these assets are mainly deposited in private bank accounts and are subject to different contractual relationships. The EU institution recommends carrying out a legal analysis of the feasibility of extending the Reparations Loan approach to these assets.
European preference. The spin-offs for Europe’s military industry are an important issue in the EU’s future macro-financial assistance to Ukraine.
France is campaigning for a genuine European preference. This is “essential if we are to make up our capacity shortfalls”, stressed French President Emmanuel Macron. He pointed out that other European financial instruments for the defence sector (SAFE, EDIP) already set minimum thresholds for purchases of equipment from the EU.
As part of the ‘ERA’ loans from the G7 countries, the UK is said to have negotiated with Kyiv that the Ukrainians would use the entire British loan to buy British equipment.
On his arrival, the Swedish Prime Minister, Ulf Kristersson, did indeed consider it “beneficial” to strengthen the European defence industry, but not through “rigid quotas”. Given the scale, nature and urgency of the Ukrainian army’s needs, the Europeans know that they are not in a position to meet all of them.
When asked about his country’s willingness to buy European equipment, Ukrainian President Volodymyr Zelensky said that, first and foremost, the EU’s financial aid would be used to “increase Ukrainian production” of drones, electronic components and missiles.
Strengthening military support. Once again, Mr Zelensky asked for more military support, in particular air defence systems, thanking the countries taking part in the PURL initiative.
While he has still not obtained any US Tomahawk missiles, he asked for financial support so that its industry can produce more military equipment, in particular long-range missiles, to be launched at targets in Russia.
This message was heard by the European leaders who, in their conclusions, stressed “the need for Member States to keep stepping up efforts to address Ukraine’s pressing military and defence needs, in particular air defence and anti-drone systems and large-calibre ammunition”. And to add that: “It is crucial to accelerate work to further support, develop and invest in Ukraine’s defence industry”.
Adoption of the 19th sanctions package. Welcoming the adoption of the 19th European package of sanctions against Russia (see EUROPE 13737/6), the leaders also welcomed the announcement of US measures. “The sanctions, both from Europe and from the US, will make a difference. (...) This is a good signal to other countries in the world to join the sanctions”, emphasised Mr Zelensky.
These measures are “an important message to Vladimir Putin that, on both sides of the Atlantic, we are stepping up the pressure to show him that war makes no sense, to silence the guns”, explained Friedrich Merz.
US sanctions will also have an impact on Europe. The Bulgarian Prime Minister, Rossen Jeliazov, pointed out that the Lukoil Neftohim Burgas refinery was more than 50% owned by Lukoil and only comes under the sanctions that will be in force starting 21 November. “So we have one month in which to make the national decision on how to approach it as a country” regarding the company, he explained. Although the refinery no longer works with Russian gas, “the restrictions have a financial dimension - concerning transactions and the use of the SWIFT system. There will be difficulties for the refining industry”.
To see the conclusions on Ukraine: https://aeur.eu/f/j47 (Original version in French by Mathieu Bion and Camille-Cerise Gessant with the editorial staff)