EU set to indefinitely freeze Russian assets, removing obstacle to Ukraine loan

By Jan Strupczewski

BRUSSELS, Dec 12 (Reuters) – The European Union looked set on Friday to indefinitely freeze Russian central bank assets held in Europe, removing a big obstacle to using the cash to help Ukraine defend itself against Moscow’s invasion.

EU governments aim to sign off by 1600 GMT, through a qualified majority vote, on a plan to immobilise 210 billion euros ($246 billion) worth of Russian sovereign assets for as long as needed to prevent major economic disruption to the EU economy.

The new freeze, which would stay in place “until there is no longer an immediate threat to the economic interests of the Union”, will replace the current system which requires a roll-over of the freeze every six months by unanimity.

This will remove the risk that Hungary and Slovakia, which have better relations with Moscow than other EU states, could refuse to roll over the freeze at some point forcing the EU to return the money to Russia.

RUSSIAN CENTRAL BANK SAYS IT’S SUING EUROCLEAR

Hungarian Prime Minister Viktor Orban said in a post on Facebook he believed the EU move would “cause irreparable damage to the Union.”

“Hungary protests against this decision and will do everything it can to restore a lawful state of affairs,” Orban wrote.

Russia’s central bank said on Friday that EU plans to use its assets were illegal and that it reserved the right to employ all available means to protect its interests.

In a separate statement, the bank said it was suing the Brussels-based central securities depository Euroclear – which holds 185 billion euros of the total assets frozen in Europe – in a Moscow court over what it said were damaging actions, affecting its ability to dispose of its funds and securities.

Belgium’s Euroclear has been subject to Russian lawsuits in Moscow courts since the EU froze the assets in 2022 following Russia’s invasion of Ukraine.

PLANNED LOAN TO UKRAINE

The indefinite asset freeze is meant to help convince Belgium to support the EU’s plan to use the frozen Russian cash to extend a loan of up to 165 billion euros to Ukraine to cover its military and civilian budget needs in 2026 and 2027.

The loan would be paid back by Ukraine only when Russia pays Kyiv war damages, making the loan effectively a grant that advances future Russian reparations payments.

“We think that the reparations proposal is by far the best option also because it doesn’t stress countries, public finances, public debt levels,” Danish Finance Minister Stephanie Lose, whose country holds the rotating EU presidency, said.

“There’s still some worries that need to be addressed. There are still of course countries that have concerns. It’s natural that there’s a discussion, but we’ll continue to work to clarify all the elements and hopefully we’ll be able to pave the way towards a decision at the European Council next week,” she told reporters on entering a meeting of EU finance ministers.

EU leaders – the European Council – are to meet on December 18 to finalise the details of the reparations loan to Ukraine, hammering out the remaining problems which include guarantees from all EU governments for Belgium that it would not be left alone to foot the bill should a potential Moscow lawsuit prove successful.

($1 = 0.8524 euros)

(Additional reporting by Krisztina Than in Budapest and Inti Landauro in Brussels; Reporting by Jan Strupczewski, Editing by Timothy Heritage)