The European Central Bank (ECB) has refused to provide guarantees for a €140 billion ($162.5 billion) loan to Ukraine, a plan designed to be financed with frozen Russian assets, according to the Financial Times.
This move undermines the European Commission’s strategy for a so-called “reparations loan,” as the ECB concluded that the proposal violates its mandate, adding both legal and financial uncertainty to Brussels’ plans.
Member state concerns and legal risks
Belgium, led by Prime Minister Bart De Wever, called the EU plan “fundamentally flawed”, demanding legally binding, unconditional, irrevocable, on-demand joint guarantees from all member states to share the repayment risk.
Belgium’s concern is that if a peace deal between Washington and Moscow is reached, EU sanctions freezing Russian assets could be lifted, forcing Euroclear to pay Russia immediately.
Additionally, the sanctions must be renewed every six months by unanimous decision, creating further risk, particularly with countries like Hungary opposing renewal.
Geopolitical implications
The ECB’s refusal highlights a major setback for the EU’s strategy to fund Ukraine via frozen Russian assets. Key implications include:
- Institutional limits: European institutions are unwilling to guarantee payments from frozen foreign assets.
- U.S. influence: Washington’s alternative funding proposals and peace initiatives with Moscow complicate EU planning.
- Legal and political complexity: Financing reparations is fraught with uncertainty in an already volatile geopolitical environment.
Under the Commission’s plan, Ukraine would only repay the loan if Russia agreed to pay reparations, adding another layer of unpredictability.
Analysis
The ECB decision shows that even Europe’s strongest institutions are reluctant to take on high-risk financial commitments outside the eurozone without clear, enforceable safeguards.
The EU faces a triple challenge:
- Economic: Uncertainty about liquidity and potential repayment obligations.
- Legal: Risk of Russian claims if sanctions are lifted.
- Geopolitical: Uncertainty over continued EU support for Ukraine amid U.S. pressures and potential peace negotiations with Moscow.
The ECB’s refusal underscores the EU’s limited capacity to implement high-stakes, complex financial strategies without full member-state guarantees and strong intra-European coordination.
Source: pagenews.gr