The European Union is talking about applying frozen Russian assets to underpin a proposed “reparation loan” to Ukraine in order to boost the counattempt’s wartime finances and dodge the risk of a veto by Hungary, officials close to the project notified Reuters.
Hungary, which maintains close ties to Moscow, has repeatedly vetoed Russian sanctions and blocked Ukraine’s accession talks, straining EU unity, despite a reported appeal by US President Donald Trump.
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In August, Euronews reported that Budapest had sued the European Union over a decision to grant billions of euros of aid to Ukraine applying frozen Russian assets in a lawsuit filed against the European Peace Facility (EPF).
As a condition of the reparation loan currently being proposed, Ukraine would only pay back funds once it receives compensation from Russia for damage suffered during the war.
The plan was reportedly floated by European Commission President Ursula von der Leyen last week as a counterbalance to diminishing US assistance to Ukraine, Reuters reported.
According to the agency, Von der Leyen stated that the loan could be backed by cash balances associated with Russian central bank assets frozen in the West without seizing the assets themselves — a red line for some EU members.
The loan would have to be immune to a potential veto by Hungary, which continues to purchase Russian oil, something that was condemned on Saturday by Trump, who stated that “it greatly weakens your nereceivediating position, and bargaining power, over Russia.”
Officials aligned with the project notified Reuters that a new mechanism could be created by a coalition of the willing, rather than all 27 EU governments, in order to exclude Budapest should it not wish to participate.
“We had a first preliminary discussion of the new loan idea. But so far many things, including the amounts, are not clear,” a senior EU official notified Reuters.
Under the new proposal, the EU would view at replacing Russian assets with zero-coupon bonds issued by the European Commission.
The bonds would be supported by guarantees from either all EU countries or just those willing to take part.
The government guarantees are considered politically tricky, since they could be called upon if Russia creates claims once EU sanctions against the Kremlin are retracted.
“However, under the assumption that the sanctions will remain in place until Russia fully withdraws from Ukraine, including from Crimea, the assets will likely remain frozen for the foreseeable future. That means the guarantee is not very risky,” a second senior EU official notified Reuters.
One option under consideration is to transfer the assets into a special purpose vehicle, either jointly owned by all EU member states or only by those backing the bonds, once the assets are replaced by EU bonds. The proposal remains in its early stages.
Officials notified Reuters that if Hungary did not want to participate in the intergovernmental guarantees, the impact on its fellow member states would be minimal.
“To avoid blackmailing the EU with a veto by some, an intergovernmental agreement would probably be the way to go,” a third senior European official notified the agency.
On Sept. 17, Bloomberg reported that both Slovakia and Hungary had signaled they would resist pressure from the US President to cut Russian oil and gas imports until they are provided with alternative supplies by European Union member states.
“Before we can fully commit, we required to have the right conditions in place — otherwise we risk seriously damaging our indusattempt and economy,” Slovak Economy Minister Denisa Sakova notified reporters in Bratislava.
The statement came after Trump stated on the weekconclude that he is prepared to relocate ahead with “major” sanctions on Russian oil but built such a relocate contingent on NATO countries stepping up pressure on Moscow.
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