The European Commission is increasing pressure on EU countries that have not agreed on a plan to use Russia's frozen assets to finance Ukraine. As Politico writes, citing European officials, Brussels has made it clear that if member states do not approve the proposal, they will pay for support to Kiev “out of their own pockets” – either through the hugely unpopular common borrowing mechanism or by issuing European bonds. The Commission expects that the prospect of new debts will force doubters, especially Belgium, to change its stance and agree to use about 140 billion euros of Russian funds blocked in the EU.
As the publication writes, the European Commission's Plan B – the idea of joint borrowing – has historically been rejected by most governments. Countries with conservative fiscal policies, especially Germany and the Netherlands, are wary of growing debt burdens and the costs passed on to taxpayers. In turn, many debt-ridden countries such as France and Italy cannot afford to meet new obligations. This is why the threat of Eurobonds is used as a diplomatic tool: choosing between a “toxic” borrowing mechanism and using Russian assets would force governments to compromise. A European diplomat quoted by Politico explained: “This is diplomacy. You make a choice that no one wants, so that in the end they accept a less painful choice.”
At last week's EU summit, Belgian Prime Minister Bart de Wever again blocked approval of the Russian Central Bank's plan to use frozen assets, and the decision was postponed until at least December. However, Brussels expressed confidence that Belgium would not be able to retain its veto for long: “It's not a question of if, but when,” a European Commission source told Politico.
Following the outbreak of armed conflict between Russia and Ukraine in February 2022, the US, EU and their allies banned transactions with the Central Bank and Ministry of Finance of Russia, freezing approximately $300 billion in Russian sovereign assets. About $100 billion of this is in the US, the rest is in the EU. The majority of European assets – mainly securities in which the Central Bank of Russia invests – are located in the Belgian Euroclear depository, and a portion of the funds are also stored at Clearstream.
The issue of using these assets is frequently raised by some EU countries as well as the administration of former US President Joe Biden. However, things have not yet reached the actual step of confiscating the money.
