EU Proposes Legal Shield for Belgium to Unlock €140B Ukraine Loan
- The EU is drafting legal guarantees to indemnify Belgium against lawsuits, aiming to unlock a €140 billion loan for Ukraine backed by frozen Russian assets
- Belgium has blocked the deal due to fears that its financial institution, Euroclear, would face sole liability for Russian retaliation and litigation
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The European Commission is finalizing a critical legal framework designed to indemnify Belgium against financial risks, a move aimed at unblocking a massive €140 billion ($162 billion) loan for Ukraine. Speaking to lawmakers in Strasbourg on Wednesday, Commission President Ursula von der Leyen confirmed that her executive body is ready to present the text that would allow the bloc to leverage immobilized Russian central bank assets as collateral. The initiative marks a significant escalation in the EU’s financial strategy, moving beyond simply using the profits from frozen assets to utilizing the assets themselves to back a long-term "reparations loan."
The negotiation process had stalled in recent weeks due to fierce resistance from the Belgian government. As the host country for Euroclear—the securities depository holding the vast majority of the €210 billion in frozen Russian assets—Belgium effectively sits at the epicenter of the financial earthquake. Prime Minister Bart De Wever has refused to sign off on the deal without "ironclad" assurances, arguing that his country cannot be left to shoulder the legal and financial fallout alone if the scheme goes wrong or if Russia successfully sues for damages.
Under the proposed "Reparations Loan" scheme, the EU would borrow funds from Euroclear’s accumulated cash balances—money derived from matured Russian bonds—and pass them to Kyiv. In exchange, the EU would issue zero-coupon AAA-rated bonds to Euroclear, preserving Russia’s nominal claim to the assets while effectively freezing them until Moscow pays war reparations. This structure is designed to bypass the legal hurdles of direct confiscation, but it still exposes Euroclear to massive litigation risks under bilateral investment treaties.
To break the deadlock, the Commission’s new legal text proposes a mechanism of collective liability. The document outlines that all 27 EU member states would provide "legally binding, unconditional, and irrevocable" guarantees to Belgium, calculated based on their national wealth. This mutualized risk-sharing agreement ensures that if an international arbitration court were to force Belgium or Euroclear to compensate Russia, the cost would be spread across the entire bloc rather than bankrupting the Belgian financial system.
President von der Leyen emphasized the moral and economic necessity of this approach during her address. "I cannot see any scenario where the European taxpayers alone will pay the bill," she stated, reinforcing the principle that the aggressor must fund the reconstruction. With the United States pulling back from direct financial assistance—a shift accelerated by the shifting political landscape in Washington—the burden of keeping the Ukrainian state afloat is increasingly falling on European shoulders.
The urgency of the situation is driven by Kyiv’s looming fiscal cliff. Financial projections indicate that Ukraine will face a severe budget deficit by the second quarter of 2026. Without this €140 billion injection, the Ukrainian government risks defaulting on its obligations, which would have catastrophic consequences for its war effort against Russia. The proposed loan is intended to cover these needs through 2027, effectively buying Kyiv time and financial stability independent of annual budget squabbles in Western capitals.
Moscow has reacted with predictable fury to the proposal. The State Duma has already passed a resolution labeling the scheme "outright theft" and threatening severe retaliatory measures against Western assets still trapped within Russia. The Kremlin has specifically targeted Euroclear in its rhetoric, warning that the depository’s assets could be seized in compensation. This hostility underscores exactly why Belgium has been so hesitant to proceed without the full weight of the European Union behind it.
The success of this high-stakes financial engineering now rests on the upcoming EU summit in December. While France and the Baltic states have thrown their support behind the plan, the final approval requires unanimous consent. If the Commission’s legal text satisfies Belgium’s demand for risk protection, the EU will have established a groundbreaking precedent in economic warfare, effectively forcing Russia to underwrite the defense of the very country it invaded.