Belgium Blocks EU Plan to Repurpose Frozen Russian Assets for Ukraine Loan

Belgium's Standoff Over Use of Frozen Russian Assets

Belgium has escalated its opposition to the European Union's plan to use frozen Russian assets to fund Ukraine, warning that the scheme could expose the country to severe legal and financial risks. Belgian Foreign Minister Maxime Prévot described the reparations loan proposal as "the worst of all options," citing concerns over potential Russian legal action and the burden it could place on Belgium's economy according to reports. Prime Minister Bart De Wever has written to European Commission President Ursula von der Leyen, calling the plan "fundamentally wrong" and demanding legally binding guarantees from other EU member states as reported.

The EU's proposal, backed by German Chancellor Friedrich Merz, would repurpose €140 billion in Russian state assets held in Belgium into a loan for Kyiv. The plan is seen as a way to sustain Ukraine's financial needs while avoiding further burden on EU taxpayers. The majority of EU nations support the idea, but Belgium has remained the most vocal critic, arguing the move could derail peace talks with Russia and trigger costly litigation according to Reuters.

The European Commission is expected to table a revised legal framework this week to address concerns, particularly from Belgium. The proposal includes mechanisms to share the financial burden across member states and avoid legal risks. However, Belgian officials say the plan still fails to provide sufficient safeguards. De Wever has demanded guarantees from other EU countries to ensure Belgium is not left liable in the event of Russian legal action or sanctions being lifted as stated by VRT.

Why the Standoff Happened

The frozen Russian assets at the center of the debate are mostly held in Belgium, with Euroclear, the Brussels-based securities depository, managing around €185 billion of the total €210 billion in frozen Russian assets in Europe. Belgium fears it would bear the brunt of any legal action from Russia, which has already threatened years of litigation if the plan proceeds. The risk is heightened by Euroclear's contractual obligation to return the funds to the Russian central bank if sanctions are lifted according to AP news.

Belgium argues that the potential liabilities could cripple the country. Prévot noted that the amount involved is equivalent to nearly half of Belgium's annual GDP, and the country could face bankruptcy if it were forced to repay the money as reported by Investing.com. This concern has led Belgium to propose an alternative: borrowing funds from financial markets instead of using frozen Russian assets. However, Germany and other supporters of the reparations loan argue that this approach is less efficient and would require interest payments as noted by Seeking Alpha.

How Markets Reacted

The debate has also drawn attention from financial experts and market analysts. Veerle Colaert, a professor of financial law at KU Leuven, said the guarantees offered by the EU are insufficient and do not fully cover the risks Belgium faces. She noted that the guarantees may not be invoked quickly enough if a crisis arises, and the costs of legal action could extend beyond the initial loan amount according to TradingView. The European Central Bank has also expressed concerns that the plan could undermine confidence in the euro, potentially affecting the EU's credibility on international financial markets according to TradingView.

Market observers have pointed out that the EU's reliance on frozen Russian assets could send a signal that European financial institutions are not safe for holding international assets. China, which also holds significant assets in Euroclear, could reconsider its financial arrangements in Europe, potentially harming long-term investment flows according to EU data. For now, however, the focus remains on whether EU leaders can reach a compromise ahead of a summit scheduled for December 18.

Risks to the Outlook

The EU's ability to fund Ukraine remains under pressure, with Kyiv's war chest expected to run dry by April 2026 if additional financing is not secured. The Commission has suggested borrowing on financial markets as an alternative, but this option requires unanimous approval among all 27 EU member states. Hungary, which has previously blocked aid to Ukraine, could complicate this approach. Without a consensus, the EU risks a funding gap that could weaken Kyiv's position in any future peace negotiations.

Germany and other supporters of the reparations loan argue it could increase pressure on Russia by making it clear that the war has high financial costs. Merz emphasized the urgency of supporting Ukraine, noting that Russian attacks are intensifying and winter is approaching. Belgium, however, continues to insist that the risks outweigh the benefits, especially given the lack of legal certainty.

The EU is now racing to finalize a legal framework that can satisfy both sides. While the Commission claims it has addressed most of Belgium's concerns, the country remains skeptical. The outcome of the December summit will determine whether the plan moves forward or if an alternative funding method is adopted. In the meantime, the standoff highlights the challenges of balancing solidarity with financial and legal risks in a crisis-driven geopolitical landscape.