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Chancellor Merz is ready to feel frozen Russian assets. Merz wants to spend this in the EU for a loan to Ukraine, he wrote in a post for the Financial Times. The total amount could amount to 140 billion euros.
According to Merz, the loan would be repaid if Russia had compensated Ukraine for the damage caused. Until then, the assets remained frozen in the EU. The proposal is not new. The EU Commission had already made considerations for using this sum as a Ukraine loan. Now Germany is also involved in the European course.
“Repolation loan” for Ukraine from frozen Russian assets
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The European Commission presented a new plan: With the frozen assets of the Russian Central Bank, an “extraordinary loan” of 140 billion euros for Ukraine is to be raised. Kyjiw would only have to repay the money when Moscow has paid the costs of war damage.
The proposal for a so -called “reparation loan” was first presented by Commission President Ursula von der Leyen in her speech on the situation of the Union at the beginning of the month. She described this as a way of continuing to support Kyjiw without further burdening the Member States.
“This is Russia’s war. And Russia should pay for it,” said von der Leyen. “Not only should European taxpayers wear the main load.”
Due to the Russian war of attack against Ukraine, around 200 billion euros of the Russian central bank are frozen in the EU. The interest income is already being used to finance weapons and ammunition for Ukraine.
Before the EU ambassador’s meeting on Friday, a document was distributed with the first details of the plan to be present. The structure provided by the Commission is extremely complex and innovative.
So the Russian fortune was frozen in the EU
The focus is on Eureclear, a central security institute based in Brussels, which manages most of the Russian assets frozen in the course of the sanctions. These, originally laid out in bonds, have now turned into cash stocks of 176 billion euros – another 10 billion will be expected in the coming years.
“Russia is entitled to this account at Eureclear,” says the document. According to the plan, Eureclear would transfer the money to the Commission, which it would then use to grant Ukraine an interest -free loan.
At the same time, the Commission would conclude a “tailor -made debt contract” with Eureclear. This would oblige Eureclear to invest the money transferred to get it back.
The total amount of the loan would be 185 billion euros. 45 billion euros would be used to secure an existing G7 loan based on the unexpected profits of the assets. Since the money is transferred, these unexpected profits would no longer be generated.
140 billion euros loan
This would leave up to 140 billion euros for the “reparation loan”, which would be paid out in regular tranches and tied to conditions. The support could be used to meet budgetary, emergency and military needs.
As agreed by the EU heads of state and government, the assets would remain frozen until two conditions are met:
- Russia ends his war of aggression
- Russia compensates Ukraine for the war damage caused
The plan stipulates that Ukraine uses the compensation made by Russia to repay the loan granted by the Commission. After that, the Euroclear Commission would repaid and EuroClear Russia.
In other words, the system is designed as a means of pressure to ensure that Moscow is held accountable for the caused damage. In view of the long -term attitude of the Kremlin, however, it is unlikely that the country is willing to pay the steadily increasing bill.
The term ‘confiscation’
Brussels is of the opinion that this construction avoids the direct seizure of state assets that are prohibited according to international law. Nevertheless, the innovative interpretation of the proposal could raise legal questions and challenges.
“It is critical that this entire operation would not touch the state assets of Russia (…) and it would be temporary,” says the document.
The transfer of the money from Eureclear to the Commission would have to be guaranteed by the 27 Member States to cover expenses if the sanctions were lifted earlier. According to the current rules, sanctions have to be renewed every six months and require unanimous approval, which means that a single country could make the entire project fail.
As part of the plan, the Commission proposes to activate the so-called “Passarelle Klausel” in order to extend sanctions with a qualified majority and thus increase the predictability and stability of the financial operation.
Ironically, however, the “Passarelle Klausel” depends on unanimity.
An earlier attempt to change the periodicity of the sanction extension was blocked by Hungary, so that the norm remained six months.
Member States are still examining the Commission’s plan, and negotiations are expected to take weeks if not months.
“We have to massively increase the costs for Russia’s aggression,” said Chancellor Friedrich Merz (CDU). He again emphasized that this assets should only be used to procure military equipment.
“We should also invite partners around the world who have frozen Russian assets to join the instrument. For this purpose, we will coordinate closely with our partners in the G7.”
Merz used the term confiscation to describe the operation. The word is missing from the Commission’s document.
In a recent interview with CBS News, French President Emmanuel Macron made a decision against the prospect of confiscation and called it a “question of credibility”.
“We will respect international law,” said Macron. “We are predictable and we will not do the impossible with these frozen assets.”
The most recent step from Brussels falls together with a drastic turnaround by US President Donald Trump. The latter said that “with the support of the European Union, Ukraine is able to recapture the entire Ukraine in its original form.”
