Brussels has initiated a decisive move to indefinitely immobilize €210 billion in Russian Central Bank assets, a critical step that fundamentally alters the landscape of potential reparations for Ukraine. This decision, agreed upon by European Union ambassadors, shifts the legal basis for holding these funds, moving them from a standard sanctions regime, which required unanimous consent and was vulnerable to individual vetoes, to a more robust framework under Article 122 of the EU treaties. This article, typically reserved for economic emergencies, bypasses the European Parliament and requires only a qualified majority from member states, effectively cementing the long-term hold on these assets within EU jurisdiction.
The strategic reclassification under Article 122 is not merely a bureaucratic adjustment; it signals a clear intent to prevent these funds from ever returning to the Russian Central Bank until Moscow has paid reparations to Ukraine and its actions no longer pose substantial risks to the European economy. This legal maneuver also serves as a bulwark against external pressures, notably from the United States, which, according to recent reports, had explored using these assets for a future settlement with Russia. By locking down the funds, predominantly the €185 billion held at Euroclear in Brussels and another €25 billion in private banks, the EU asserts its control over a significant financial lever in the ongoing conflict.
The European Commission’s justification for invoking Article 122 rests on a novel interpretation of its scope, arguing that the fallout from Russia’s full-scale invasion constitutes a “serious economic impact” on the EU. This includes “serious supply disruptions, higher uncertainty, increased risk premia, lower investment and consumer spending,” alongside a barrage of hybrid attacks. Such a broad interpretation aims to solidify the legal ground for preventing the transfer of these funds back to Russia, framing it as essential to mitigating damage to the Union’s economy. A new qualified majority would be required to trigger any future release of these funds, underscoring the long-term commitment.
However, this ambitious plan faces considerable hurdles, particularly from Belgium, the primary custodian of a large portion of these assets. Belgian Prime Minister Bart De Wever has openly questioned the suitability of Article 122 and the existence of an economic emergency to justify its activation. De Wever, drawing an analogy to breaking into an embassy and selling its contents, has articulated three key conditions for Belgium to support the proposed reparations loan. These include the full mutualization of risks by all member states, liquidity safeguards for Euroclear to prevent liability issues if assets are prematurely released, and complete burden-sharing across all member states holding Russian assets, including France, Germany, Sweden, and Cyprus.
The Belgian concerns highlight the complexities of converting immobilized assets into a reparations loan. The Commission has proposed splitting guarantees into two tranches of €105 billion each, but Belgium seeks greater coverage against potential judicial awards, even suggesting open-ended guarantees, a prospect deemed unfeasible by other states. Furthermore, Belgium’s apprehension about Euroclear’s liability underscores a critical financial risk: if the assets were to be released prematurely, Euroclear could face legal claims from the Russian Central Bank. While the Article 122 ban makes premature release highly unlikely, Belgium’s insistence on a robust liquidity backstop, which the European Central Bank has declined to provide, remains a point of contention.
The challenge of securing full burden-sharing also looms large. While the Commission aims to mobilize the entire €210 billion, the willingness of other nations, such as France, which holds an estimated €18 billion, to pool their assets remains uncertain given the banking sector’s emphasis on privacy and secrecy. De Wever has warned that if Belgium’s conditions are not met, the country will mount a legal challenge, a move that could derail the entire initiative. Diplomats concede that overriding Belgium with a qualified majority would be politically unsustainable, suggesting that if these reservations cannot be addressed before the December 18 summit, the EU may resort to issuing €90 billion in joint debt as a Plan B, though this too faces potential obstruction from countries like Hungary. The path to utilizing these frozen assets for Ukraine’s recovery remains fraught with diplomatic and financial complexities.
