The European Union’s initiative to provide a reparations loan for Ukraine has encountered another challenge as Euroclear, the primary custodian of frozen Russian assets, expressed concerns over the proposal. According to Euroclear, the plan is “very fragile” and could lead to significant uncertainty, potentially causing foreign investors to withdraw from the eurozone.
This warning comes as German Chancellor Friedrich Merz meets with Belgian Prime Minister Bart De Wever and European Commission President Ursula von der Leyen in Brussels. The meeting aims to resolve the issues surrounding the loan before a critical summit on 18 December.
“The proposal, as it stands, seems to have a great deal of legal innovation,” said a Euroclear spokesperson to Euronews. “Such innovation raises a lot of questions. We have the impression that the construction is currently very fragile.”
Euroclear serves as a central securities depository where most of the Russian assets are held. Its location in Brussels makes Belgium a key player in the ongoing debate about how to fund Ukraine’s budgetary and military needs for 2026 and 2027.
“While we support the objective to support Ukraine, this initiative could have far-reaching legal, financial, and reputational risks for Euroclear, Belgium, the European Union and its financial markets,” the spokesperson added.
Under the proposed scheme, the European Commission would use the frozen assets of the Russian Central Bank to create a zero-interest line of credit for Ukraine. Kyiv would only be required to repay the loan once Russia agrees to compensate for the damages caused by its war of aggression. However, analysts believe the likelihood of Russia agreeing to such reparations is minimal.
The EU aims to cover €90 billion of Ukraine’s €135 billion financing gap for the next two years by accessing these assets. To do so, it needs the approval of Belgium.
The proposal, which has no precedent in modern history, has been met with skepticism from both the Belgian government and Euroclear since its inception. Euroclear is also worried about its ability to meet its obligations to the Russian Central Bank if sanctions are lifted too soon and the €185 billion is not raised in time.
Belgian authorities fear that if they face legal action and win, Russia might demand the return of its assets, creating a financial gap equivalent to the annual federal budget. This could potentially lead to Belgium’s bankruptcy.
To address these concerns, the Commission has suggested a long-term immobilisation based on a qualified majority vote to prevent a sudden halt or veto. It has also pledged emergency lending to capitals that fall short of their promised guarantees.
However, Euroclear is concerned about potential retaliation from Russia, which holds roughly €17 billion in assets with the organization. The Kremlin could seize these funds if it chooses. In response, the Commission states that Euroclear would be allowed to access the assets of its Russian counterpart, the National Settlement Depository, held across the bloc. Nevertheless, legal uncertainties remain.
Euroclear’s concerns extend to the legal foundation of the plan. Using Russia’s sovereign assets to issue the reparations loan could have “knock-on” effects across the eurozone, prompting investors to flee due to fears of unilateral decisions by authorities in the future.
Von der Leyen acknowledged this scenario in a letter to EU leaders, stating that the bold move could be perceived as unlawful confiscation, even though she insists the legal basis is sound and the loan is the best course of action for the bloc.
“If international investors see this mechanism as a confiscation of Russian assets, confidence in Europe could erode – impacting financial markets and increasing borrowing costs for all EU member states,” the Euroclear spokesperson said.
“While the proposed reparations loan may seem cost-effective, it risks becoming more expensive and could drive away foreign investment.”
Euroclear’s concerns are set to influence Prime Minister Bart De Wever as he prepares for a meeting with Merz and von der Leyen on Friday evening. De Wever has repeatedly highlighted the risks Euroclear faces and has stated he will not be pressured into accepting the plan, placing him in a minority among European Council leaders who generally support the reparations loan.
Hungary and Slovakia also oppose the initiative for different reasons. De Wever emphasized his commitment to the interests of Belgian taxpayers, despite pressure from larger, influential neighbors.
Merz and von der Leyen have pledged to consider De Wever’s concerns, continue high-level discussions, and ultimately secure his approval before the crucial summit. A Commission spokesperson noted, “It’s legitimate to pose questions, and it’s also legitimate to try to find answers to those questions.”
Time is running out: EU leaders will convene on 18 December for a pivotal summit to determine how to meet Ukraine’s financial and military needs. Ukrainian authorities estimate that the country will require additional foreign assistance as early as April.
In parallel, the White House, which seeks a swift resolution to the conflict and is engaging in direct talks with Moscow, is reportedly exploring ways to block the reparations loan. According to Bloomberg, the US has lobbied “several” member states to oppose the plan, arguing that it could prolong the war.
Euroclear CEO Valerie Urbain echoed these sentiments in an interview with Belgian TV, stating, “At this stage, that money would be better spent on peace negotiations, rather than setting up an extremely complex and risky legal structure and then losing that leverage in the negotiations.”
If no breakthrough is achieved, the EU will have to turn to the financial markets and raise €90 billion in common debt to support Ukraine, a solution favored by Belgium.