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Brussels floats ‘emergency’ powers for loan

EU proposes workaround to use Russia assets for Kyiv and quash dissenters

PAOLA TAMMA AND LAURA DUBOIS BRUSSELS

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Brussels has proposed a legally contentious workaround to raise up to €210bn for Ukraine backed by immobilised Russian state assets, including emergency powers that in effect strip dissenting countries of their veto.

The proposal, which would mark a watershed moment for the EU by enabling sanctions to be imposed without unanimity, is a last-ditch attempt to ensure Kyiv’s economic survival by bypassing potential opposition from Russia-friendly countries such as Hungary or Slovakia.

The “reparations loan” would leverage up to €210bn of Russian assets immobilised by EU sanctions to fund Kyiv, which would not have to repay the loan until Russia pays reparations. The commission would initially raise €90bn to cover Ukraine’s funding needs for two years. EU countries would have to back the loan with national guarantees.

“Europe will remain [Ukraine’s] strongest and most steadfast partner . . . we can equip them with the means to defend themselves and lead peace negotiations from a position of strength,” said European Commission president Ursula von der Leyen.

The commission’s proposal would try to lock Russian sovereign assets in the EU indefinitely through emergency powers. The legal measure aims to override states such as Hungary potentially using a veto on the rollover of sanctions, which expire every six months.

The commission plan would “prohibit, on a temporary basis, any direct or indirect transfer to or for the benefit of the Central Bank of Russia”. Such restrictions, which mimic sanctions by ensuring Russian central bank assets remain immobilised in the EU, are justified as being “urgently required to limit the damage to the union’s economy”.

The extraordinary measures aim to overcome the main reservations of Belgium, which fears being left on the hook as a result of most of the assets being held at Brussels-based central securities depository Euroclear.

Belgium is worried it would have to repay the loan if sanctions were lifted and the assets unfrozen, or in the event of a peace deal without agreement on reparations. To address some of the concerns, the proposal would cover Russian central bank assets immobilised at all financial institutions in the EU, and not just the €185bn held at Euroclear.

The commission proposal invokes an emergency clause — Article 122 of the EU treaties — arguing that if Russian assets became unfrozen it would wreak economic havoc for EU countries, as they would have to immediately raise the loan amount to repay Russia.

Some officials fear the workaround will contravene EU law. One official said the strategy was “crazy” and added that there was “clearly not an economic emergency in the internal market”.

The European Central Bank has also resisted the idea that it could backstop “reparations loans”, arguing that the provision of such emergency liquidity would violate its legal mandate.

Christine Lagarde, the ECB president, yesterday said the reparations loan proposal was something that “stretched [and] that hopefully is in compliance with international law”.

Brus­sels floats ‘emer­gency’ powers for loan

EU pro­poses work­around to use Rus­sia assets for Kyiv and quash dis­sent­ers

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