Among all the moving parts of the peace plan being hammered out by Ukraine, Europe, and the United States, nearly the most important is the one that is not yet moving.
Negotiators in Berlin appear to have agreed on many of the contentious points on a cease-fire and peace plan, including post-war security guarantees, and U.S. envoys will reportedly present the plan to the Kremlin later this week.
Among all the moving parts of the peace plan being hammered out by Ukraine, Europe, and the United States, nearly the most important is the one that is not yet moving.
Negotiators in Berlin appear to have agreed on many of the contentious points on a cease-fire and peace plan, including post-war security guarantees, and U.S. envoys will reportedly present the plan to the Kremlin later this week.
But all eyes will be on a big European Union meeting on Thursday to see if the bloc can finally break a logjam and find a way to tap hundreds of billions of dollars in frozen Russian Central Bank reserves to keep Kyiv afloat before the country runs out of money early next year.
Working out large-scale financial support for Ukraine is at least as important as finalizing questions over the size of the country’s post-war army, the composition of any European security force, or the scope and reliability of U.S. security guarantees.
That is why the start-and-stop efforts to turn frozen Russian funds into an immediate loan for Ukraine of at least 140 billion euros are drawing so much attention this week. U.S. Senator Sheldon Whitehouse said Tuesday in Washington that the question of how to monetize those reserves “is a global security issue” that should not be “up to Belgian bankers.”
“None of the security details [in the peace proposals] matter if Ukraine is broke by springtime,” said Lucas Guttenberg, a director of the Europe Future program at Bertelsmann Stiftung, a German foundation. “That’s why I am hopeful about Thursday. We need to find the money, and there is no magic wand” otherwise that can provide the massive cash injection that Kyiv needs to meet its financial obligations over the next two fiscal years.
Russian overseas reserves have been frozen since the Ukraine war began, but Europe has struggled to find a way to monetize the more than 200 billion euros it holds for Ukraine’s benefit. The bloc has agreed to small-scale loans backed by the interest generated by frozen Russian reserves, but the latest creative plan would have called for a lump-sum loan backed by the entirety of Russia’s frozen assets, payable only after Russia had made good on post-war reparations.
There were always some naysayers: Belgium, where the bulk of the frozen money is stored in the Euroclear clearing house, has always been lukewarm on the idea of touching the money, and Hungary and Slovakia have long made it difficult for fellow EU member states to support Ukraine or put the screws to Russia.
But in recent days, opponents of the “reparations loan” plan have multiplied. Italy, Bulgaria, Malta, and the Czech Republic have also come out against the idea of seizing, rather than just freezing, Russia’s overseas state assets. Even that opposition is not enough to overcome the new, looser EU rules that ditched unanimous consent for a “qualified majority” of countries to approve measures related to the Russian assets, but Europe is loath to railroad the proposal through.
German Chancellor Friedrich Merz, a champion of the creative loan idea, warned that Europe would be “severely damaged” if it can’t agree on a way to tap the assets this week. EU foreign affairs chief Kaja Kallas on Monday acknowledged that implementing the plan seems “increasingly difficult.”
Ukrainian President Volodmyr Zelenksy, speaking before the Dutch parliament on Tuesday, urged the Netherlands to support the loan proposal, arguing that “these Russian assets can and must be fully, fully used to defend against Russia’s own aggression. The aggressor must pay.” (The European Union on Tuesday established a commission to address claims for damages to Ukraine caused by the Russian invasion.)
The suspicion in Europe is that the newfound skepticism of the loan proposal reflects the desire of right-wing governments to curry favor with the Trump administration, which initially sought to use the frozen Russian assets for the United States’ and Russia’s benefit through for-profit investment vehicles.
“This loan is the way to finance Ukraine. The big question is if [Italian premier Giorgia] Meloni passes the test of being more friends with Trump, or is more of a good European,” said Guttenberg.
For n0w, Belgium is still playing hard to convince, even after Europe scrambled to provide a suite of guarantees meant to assuage that country’s concern that it could face legal liability for touching the bulk of Russia’s frozen assets. (Russia has already filed some legal actions in that direction.)
At any rate, as crucial as the Thursday meeting is for shoring up Ukraine’s future finances, Europe has already taken the most important and most daring step, by freezing the Russian overseas funds indefinitely.
By invoking a seldom-used emergency powers clause, Brussels was able last week to permanently freeze the 210 billion euros of Russian Central Bank assets held in a half-dozen member states without relying on the dangerous and cumbersome need to renew the freeze through unanimous consent every six months. That process led to continued ransom threats from Hungary, and fears that the frozen funds would be released prematurely; now Europe has a veto on the ultimate use of those frozen funds.
“The decision Europe made last week was much more important. At the end, that money is now in the hands of the Europeans, and before it was subject to review every six months,” said Guttenberg. “All that has completely changed.”
The next step will come later this week, as European leaders seek to bridge the remaining differences on how to move from freezing to essentially seizing assets. The stakes, Zelensky said, couldn’t be higher:
“It is a security guarantee for Ukraine—a financial security guarantee.”
