Top brass within the European Commission and the Belgian government will meet on Friday in a bid to break the political deadlock over using frozen Russian state assets to finance a €140 billion reparations loan to Ukraine, two senior EU officials told POLITICO.

Belgium has been reluctant to endorse the plan, floated by the Commission as a way to use sanctioned Russian funds to support Ukraine without permanently seizing the cash, because the funds in question are held by the Brussels-based financial firm Euroclear.

Prime Minister Bart De Wever fears that his government will be on the hook to repay Moscow’s billions if an army of Kremlin lawyers sue over the initiative. At a meeting of EU leaders in October, De Wever demanded stronger assurances from EU leaders to protect his country from the financial and legal risks that could arise from the initiative.

Friday’s crunch meeting comes after deputy finance ministers failed on Tuesday to progress on negotiations over the reparations loan, with the Commission warning that time is running out.

“The longer we now run delays, the more challenging it will become. It may open questions on some possible bridging solutions,” Economy Commissioner Valdis Dombrovskis told reporters in the Bulgarian capital of Sofia on Tuesday.

Ukraine faces a budget shortfall next year if money doesn’t arrive by spring. Without a deal on using the Russian assets, the Commission is warning EU governments that they’ll have to prop up Kyiv with their own wallets — and there’s little appetite for that after a bruising pandemic demolished national budgets.

“How are we going to get €140 billion out of European budgets at this time of year?” asked a deputy finance minister, who expressed frustration with Belgium and, like others in this article, was granted anonymity to speak freely. “There’s no way.”

The Commission will present Belgium with a memo of alternative funding options for Ukraine that involve EU borrowing. The hope is that De Wever, who’s also financially constrained, will relent once he sees there are no other viable options.

What Belgium wants

For his part, De Wever has laid out what it would take for Belgium to support the plan.

Firstly, Belgium wants to eliminate the threat of a Hungarian — or other country’s — veto on sanctions.

Every six months, the EU must unanimously reauthorize its sanctions against Russia, meaning that any Kremlin-friendly nation, such as Hungary or Slovakia, could unfreeze Russian assets and force Euroclear to wire all sanctioned cash back to the Kremlin.

The Commission is working to nullify the veto to ensure Belgium gets the long-term certainty it needs on this front.

Secondly, Belgium wants other EU countries to share the risk.

The Commission has repeatedly said that Ukraine would only have to start paying back the €140 billion loan once Russia stops the war and pays reparations. But the Belgians want EU capitals to provide financial guarantees against the loan if Russia ends the war and claims its assets back — or if the Kremlin’s lawyers convince a court that Moscow should be repaid. 

Even if all EU countries provide national guarantees, Belgium wants to be sure that any such payouts would be immediate. The Commission has suggested it could lend money to any country that struggled to provide cash at a moment’s notice. But that approach would add to a country’s debt pile, an unpopular prospect for the likes of France and Italy.

And finally, Belgium is urging the Commission to consider using the EU’s current seven-year budget to guarantee the loan, rather than relying on national governments.

The Commission could, in theory, use part of a cash buffer, called the headroom, set aside in the EU budget to do this. The idea has merit once the new budget is unveiled in 2028. But it’s unclear whether there’s enough headroom for the current cash pot.

Giovanna Faggionato provided reporting from Sofia, Bulgaria.