At a high-stakes summit, European Union leaders are preparing to take unprecedented steps to help Ukraine

BRUSSELS (AFP) – European Union leaders are about to try something they have never tried before. The chances of failure are high. Their actions this week could set dangerous precedents and a wrong move could undermine trust among the bloc’s 27 member states for years to come.

At a summit starting Thursday, several leaders will push for tens of billions of euros in frozen Russian assets held in Europe to be used to meet Ukraine’s economic and military needs over the next two years.

Ukraine is on the verge of bankruptcy. The International Monetary Fund estimates that it will need a total of 137 billion euros ($160 billion) in 2026 and 2027. He must have the money by spring. The European Union has pledged to provide funds, one way or another.

“One thing is very clear,” European Commission President Ursula von der Leyen told EU lawmakers on Wednesday. He added: “We have to make a decision on financing Ukraine for the next two years in this European Council.”

European Council President Antonio Costa, who will chair the summit, pledged to continue the leaders’ negotiations until an agreement is reached, even if it takes days.

High risk loan

The European Commission proposed that leaders use some of the frozen assets — totaling 210 billion euros ($246 billion) — to guarantee a 90 billion euros ($105 billion) “reparations loan” to Ukraine. The United Kingdom, Canada and Norway will fill this gap.

The plan is controversial. The European Commission insists that its logic and legal basis are sound. But the European Central Bank warned that international confidence in the single euro currency could be damaged if leaders suspect asset seizures.

Most of the frozen assets are owned by the Russian Central Bank and are held at the Brussels-based financial clearinghouse Euroclear. Belgium fears Russian retaliation, through the courts or in other more nefarious ways.

Euroclear fears for its reputation and believes the Commission’s idea is legally fragile and that international investors may look elsewhere if it turns Russian assets into an EU debt instrument, as von der Leyen’s plan requires.

Last week, the Russian Central Bank announced that it had filed a lawsuit against Euroclear in a Moscow court. The chances of success of the case seem limited, but this step increases pressure on all parties before the summit.

It’s unlikely to be Plan B

The Commission, the European Union’s powerful executive authority, has proposed a second option. It could try to raise money from international markets, in the same way it secured a large economic recovery fund after the start of the coronavirus pandemic.

Belgium prefers this option. But Plan B requires approval by all 27 leaders for its success, and Hungary refuses to fund Ukraine. Hungarian Prime Minister Viktor Orban sees himself as a peacemaker. He is also Russian President Vladimir Putin’s closest ally in Europe.

In contrast, Plan A – the reparations loan – only requires a majority of about two-thirds of member states. Hungary cannot use its veto power alone. Slovakia might say no. Belgium, Bulgaria, Italy and Malta still need to be convinced.

Even if the Six countries reject the loan to Ukraine – which will only be repaid if Russia ends its war and pays hundreds of billions of euros in reparations for war damage, something many Europeans doubt Putin might do – they will have no minority opposition.

Pressure on Belgium, which has a huge stake in the outcome and deep concerns about the loan, could undermine the entire European project, making it more difficult to find a voting majority on other issues in the future.

But on the eve of the summit, it remained unclear exactly how the plan would work, what kind of guarantees each country would offer to reassure Belgium that it would not face Russia alone, and even whether leaders could agree to it directly this week.

“It’s a really new approach. Everyone has questions,” said a senior EU diplomat involved in the negotiations, which continued on Wednesday. “You are talking about mobilizing public finances. Parliaments may need to intervene. It is not easy.”

The diplomat was appointed to brief journalists on the latest developments on the condition that his name not be revealed.