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Approving the reparations loan for Ukraine will give the European Union greater leverage at the negotiating table to end Russia’s war, High Representative Kaja Kallas has said in response to recent warnings by the Belgian prime minister.
“It will definitely strengthen the European position vis-à-vis Moscow, that’s very clear. We need to move on with this,” Kallas said on Monday after a meeting of EU defence ministers.
The loan, she argued, will send a triple message at this stage of the process.
“To Ukraine, that we are there to help them defend themselves. Second message to Moscow, that they can’t outlast us. And the third message is to Washington, that we are taking very strong and very credible steps,” she said.
Russians “don’t want this reparations loan to happen. So our response should do exactly the opposite,” she added.
The reparations loan is one of the three options presented by the European Commission to meet Ukraine’s financial and military needs for the next two years.
Under the scheme, the bloc would channel the immobilised assets of the Russian Central Bank to Ukraine as a zero-interest line of credit. Kyiv would be asked to repay the loan only if Moscow agreed to compensate for the damages caused by its war of aggression.
The bulk of the assets, about €185 billion, is held at Euroclear, a central securities depositary in Belgium. This has made the country the cardinal vote in the debate.
Last week, Belgian Prime Minister Bart De Wever sent a scathing letter to the Commission, lambasting the proposal as “fundamentally wrong” and ridden with “multifold dangers” that could lead to multi-billion losses at court.
“I will never commit Belgium to sustain on its own the risks and exposures that would arise from the option of (a) reparations loan,” De Wever wrote.
De Wever also described the untested project as an obstacle to the White House’s ongoing push to strike a deal between Ukraine and Russia.
“Hastily moving forward on the proposed reparations loan scheme would have, as collateral damage, that we, as the EU, are effectively preventing reaching an eventual peace deal,” the Belgian premier wrote.
Since being caught off guard by the 28-point draft, Europeans have been scrambling to reassert their voice in the fast-moving process and help Kyiv amend the most problematic aspects of the text, including a highly controversial model to turn the Russian assets into investment opportunities for both Washington and Moscow.
The text has considerably changed after several rounds of negotiations.
“I’m afraid that all the pressure will be put on the weaker side because that is the easier way to stop this war when Ukraine surrenders, but this is not in anybody’s interest,” Kallas said. “If this (invasion) pays off, we will see this elsewhere, all around the world.”
Plan B is in the works
De Wever’s brazen intervention has sent alarm bells ringing.
EU leaders are meant to decide on a new source of financing for Ukraine when they meet on 18 December. If the reparations loan falls apart, the bloc will have to put together at least €45 billion to cover Kyiv’s needs for 2026.
In De Wever’s view, common borrowing “would, as a matter of fact, come cheaper than other options, in particular the option of a reparations loan, if all risks are factored in”.
But for Kallas, tapping into the Russian assets is the “most viable option” because it would spare national treasuries from footing the bill and make Moscow pay for the havoc it has wreaked. Bilateral contributions would lead to uneven burden-sharing, while joint debt is “out of the question” for some capitals, the High Representative said.
De Wever has said he would approve the reparations loans only if EU leaders provide, in writing, sweeping guarantees to back the Russian assets and all the associated risks for Belgium and Euroclear. Altogether, the coverage could vastly exceed €185 billion.
“I don’t, in any way, diminish the worries that Belgium has, but we can address those. We can shoulder those risks together,” Kallas told reporters.
“We definitely need to move on.”
Other defence ministers echoed her view as they headed to Monday’s meeting.
“It is very important to put more pressure on Russia, for example, by using the frozen assets,” said the Netherlands’ Ruben Brekelmans
“It’s high time to use the reparations loan to support Ukraine,” said Sweden’s Pål Jonson, noting the combination of high debt and low growth across Europe made it more difficult for member states to pay for the support out of pocket.
Despite the broad support that the reparations loan has gathered, the Belgian resistance remains formidable. As the host of Euroclear, it is improbable that the majority would try to outvote the country and move forward with the plan without its blessing.
The complex deadlock has prompted EU officials and diplomats to seriously consider an emergency financial solution to plug Ukraine’s most immediate shortages.
The interim method could be presented as early as this week when the Commission unveils the legal texts for the reparations loan.
Adding to the pressure is an $8.1 billion programme that the International Monetary Fund (IMF) is meant to grant Ukraine. For the IMF to make a final decision, it will need firm commitments by European allies to ensure Kyiv’s macro-economic stability.
After hosting President Volodymyr Zelenskyy in Paris, French President Emmanuel Macron said he had a “lot of respect” for De Wever and his “legitimate” concerns and hoped an “adequate solution” would be found before the Christmas break.
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