BRUSSELS — Belgium’s refusal to back a multibillion-euro EU loan to Ukraine could prompt the International Monetary Fund to block financial support for Kyiv — resulting in a cascading loss of confidence in the war-torn country’s economic viability, EU officials warn.

European supporters of the controversial €140 billion “reparations loan,” backed by Russian state assets frozen in the EU, argue the IMF’s continued support for Ukraine is crucial, and fear time is running out to convince the institution to grant new loans to Kyiv.

Ukraine is facing a massive budget shortfall and desperately needs funding from the IMF to continue defending itself against Russia’s full-scale invasion. The IMF is considering lending $8 billion to Kyiv over the next three years.

But hopes of securing the IMF’s financial backing hinge on whether the EU can finalize its own €140 billion loan to Ukraine using frozen Russian state assets that are mostly held in Belgium.

One European Commission official and diplomats from three member countries said that securing such an agreement will convince the IMF that Ukraine is financially viable for the coming years — a requirement for the Washington-based institution to bankroll any country.

But last month, Belgium opposed the loan during a meeting of EU leaders over financial and legal concerns, dampening hopes of finalizing an agreement in time for a crucial IMF meeting that is likely to be held in December.

“We are facing a timeline issue,” said an EU official who, like others quoted in this story, was granted anonymity to speak freely. They pointed to the fact that the next gathering of EU leaders is only slated for Dec. 18 and 19 — underscoring the need for more urgent solutions.

With the U.S. significantly downsizing its support to Ukraine, the IMF expects the EU to bear the brunt of its financial needs in the coming years.

While the size of the IMF’s program for Ukraine is relatively small, its approval signals to investors that the country is financially viable and on track with its reforms.

“It’s a benchmark for other countries and institutions to evaluate whether Ukraine is doing proper governance,” said a Ukrainian official. IMF experts will visit Kyiv in November to discuss the program for the next three years.

“[The IMF’s support] is something that we should not play with,” the EU official added.

The IMF did not respond to POLITICO’s request for comment.

Why the €140 billion loan matters

During their last summit, EU leaders stripped a reference to the €140 billion Ukraine loan from the official Council conclusions as a concession to Belgium.

The watered-down text merely “invites the Commission to present, as soon as possible, options for financial support based on an assessment of Ukraine’s financing needs.” Crucially, the text falls short of indicating specific actions to meet these goals.

Such vague and open-ended wording is unlikely to satisfy the IMF’s concerns on Ukraine’s finances, said one EU official and two EU diplomats.

Stronger measures could involve issuing a legal proposal for the €140 billion loan, adopting stronger conclusions during a meeting of finance ministers or calling an extraordinary leaders’ summit, they said.

In order to strengthen Ukraine’s economic credentials, the EU is also telling the IMF that Kyiv won’t have to repay the €140 billion loan in the years to come.

Brussels insists that the loan would only be paid back to Moscow if the Kremlin ends its war in Ukraine and pays reparations to Kyiv — which is seen as an unlikely scenario.

“There is no universe in which Ukraine needs to come up with the money itself,” said another EU official. “It either gets the money from Russia or doesn’t give it back. As far as Ukraine is concerned, it’s a good as a grant.”

CORRECTION: This article has been updated to correct the amount of money the IMF is considering lending to Ukraine.