The European Commission has not abandoned the idea of presenting this week its proposal aimed at guaranteeing financing for Ukraine for 2026 and 2027, potentially by means of a ‘Reparations Loan’ optimising the use of Bank of Russia assets immobilised in the European Union since February 2022.
The provision of public loan guarantees by Member States and/or the EU budget is a central element of the preparatory discussions.
Belgium, which hosts the Euroclear central securities depository where most of the immobilised Russian assets are located, is asking its partners for “legally binding, unconditional, irrevocable, on-demand, joint and several guarantees to the Union, based on the GNI key, to ensure that the Union is always able to repay the funds without receiving countervailing payments from Ukraine” (see EUROPE 13762/3).
As envisaged, the ‘Reparations Loan’ would only be repaid by Ukraine once Russia has paid war reparations to Ukraine, and assumes that European sanctions against the Bank of Russia are maintained in the meantime. If the sanctions are not renewed, Russia will reportedly immediately take steps to recover the immobilised assets. The financial package for the proposed loan should therefore allow for the possibility that Euroclear may have to transfer very large amounts of cash at very short notice.
However, according to the Financial Times, the ECB has refused to act as lender of last resort to provide such liquidity, arguing that such a practice is tantamount to substituting itself for the bonds of euro area countries.
Guaranteeing the necessary liquidity is “an absolutely essential part of the discussions” on the mechanism under management and on how to “return Russian assets, if necessary”, European Commission spokesperson, Paula Pinho, admitted on Tuesday 2 December, stressing the need to respect international law. In the light of the ECB’s position, “alternative solutions” are being examined, she added.
Member States recognise the need to provide solid guarantees for the planned loan. However, some are reluctant to grant guarantees that will last longer than the term of the loan. The idea of involving the European Stability Mechanism (ESM), the euro area’s permanent rescue fund with a firepower of several hundred billion euros, is said to have resurfaced. (Original version in French by Mathieu Bion)