The European Commission is intensifying talks with the Belgian government to secure a crucial €140 billion reparations loan to Kyiv as the clock ticks down to Ukraine running out of money in spring. But with Belgium’s Prime Minister Bart De Wever focused on a budget crisis at home and the European Parliament likely to get a say in the reparations loan, which would slow down approval, time is looking tight. The latest round of negotiations on the mooted loan, which would be backed by frozen Russian state assets held on Belgian soil, comes to a head Friday morning when senior officials from the Commission’s economic and budgetary departments will try to reassure the Belgian leadership that any financial and legal risks associated with the loan are taken care of. De Wever is standing in the way of the planned EU mega-loan, which aims to give Kyiv three years’ financial breathing space. Ukraine currently faces a budget shortfall of some $60 billion over the next two years, excluding the cost of supporting the army. Failure would force the bloc’s leaders to look to their own coffers to sustain Kyiv’s defense against Russian forces — or risk leaving Kyiv to fall into Moscow’s hands. It’s the Commission’s job to assuage De Wever’s fears that Belgium will be on the hook to repay Moscow if the war ends, or the Kremlin’s lawyers successfully sue his government for using the immobilized assets, which are under the stewardship of Brussels-based financial depository Euroclear. The immobilized assets are under the stewardship of Brussels-based financial depository Euroclear. | Ansgar Haase/Picture Alliance via Getty Images One official, who like others in this article was granted anonymity to reveal deals of confidential meetings, said there will be talks in the coming days at all levels, including the highest. But the negotiations come as De Wever faces a political pickle at home. His government’s parties are locked in tense talks in an attempt to nail down the country’s budget and make good on the coalition’s promise to cut €10 billion in spending.  De Wever said Thursday that he asked Belgium’s King Philippe to give the government until Christmas to hash out a budget deal after missing several previous deadlines to do so, and stressed that it was the government’s final shot at agreeing a budget. IF BELGIUM AGREES, WHAT THEN? Once Belgian concerns are satisfied, the Commission will formally propose legislation on the reparations loan in the coming weeks, according to two officials briefed on the plans. Two other EU officials briefed on the plans told POLITICO that the Parliament will likely also be involved in crafting the legislation. This could prolong the process and threaten the Commission’s hopes of getting €140 billion before April, when Kyiv is expected to run out of money. Adding to the pressure is the fact that the International Monetary Fund’s continued support for Ukraine hinges on the EU loan. “The longer we now run delays, the more challenging it will become,” Economy Commissioner Valdis Dombrovskis told reporters in Sofia this week on the margins of a conference. “It may open questions on some possible bridging solutions or so. So sooner is better.” As a safeguard, the Belgians are demanding that EU governments provide national guarantees worth over €170 billion against the loan that can be paid out at a moment’s notice. De Wever also wants assurances that using the cash value of the Russian assets would also stand on legal ground. The Commission’s lawyers have “very thoroughly assessed all the legal risks or possible litigation risks,” which they see as “contained,” Dombrovskis said in Sofia. He added that “in any case, guarantees to be provided to Belgium [are] to cover potential financial risks Belgium may face” if Moscow’s lawyers sue the government. The goal is to have the bloc provide national guarantees against the loan “at least for the next two years, which could be taken over by the EU guarantee” in 2028, when the next seven-year EU budget begins, said Dombrovskis. The more difficult task is eliminating the veto threat to EU sanctions from Kremlin-friendly countries, such as Hungary and Slovakia. The Commission is considering a legal loophole that would keep Russian state assets frozen until it ends the war and pays reparations to Ukraine. Otherwise, the EU must unanimously reauthorize its sanctions against Russia every six months. Unfreezing the Russian assets would force Euroclear to wire all sanctioned cash back to the Kremlin. Hanne Cokelaere contributed to this report.

BRUSSELS — The EU is ratcheting up pressure on governments reluctant to agree on funding for war-ravaged Ukraine — telling them if they don’t force Russia to foot the bill, they’ll have to do it themselves. The European Commission is acutely aware that its plan B — joint EU borrowing known as eurobonds — is even more unpalatable for funding a €140 billion reparations loan for Kyiv than its idea of using frozen Russian state assets, which hit a roadblock last week. Governments historically hostile to big spending, especially Germany and the Netherlands, nicknamed the “frugals,” loathe the prospect of piling greater debt onto taxpayers. Spendthrift nations, France and Italy in particular, are too indebted to take on more.  But that’s the point. European officials are betting that Belgium, which houses nearly all the assets and has expressed concerns about the legitimacy of seizing them, along with other countries that have raised objections more quietly, will be won over to the plan by the prospect of the joint borrowing alternative, which they’ve long considered toxic. “The lack of fiscal discipline [in some EU countries] is so high that I don’t believe that eurobonds will be accepted, certainly by the frugals over the next 10 years,” said Karel Lannoo, chief executive of the influential Centre for European Policy Studies, a Brussels think tank. That’s why using the frozen Russian assets looks like the only game in town. “€140 billion is a ton of money and we have to use it. We have to show that we’re not afraid.” European governments and the European Central Bank have slowly come round to using seized Russian assets to fund the €140 billion. Initially they were wary, considering snatching another country’s cash ― no matter how badly that country had acted ― legally and morally dubious. But Ukraine’s pressing needs, and Washington’s uncertain approach, has focused minds. At last week’s summit of EU leaders, however, Belgium’s Bart De Wever refused to budge on the plan, which needs the backing of all 27 governments, forcing the bloc to postpone its approval until December at the earliest. ‘THIS IS DIPLOMACY’ Now the EU is in a race against time on two fronts. First, Ukraine is set to run out of money by the end of March. And second, decision-making of any kind could be about to become far tougher as Hungary looks to join forces with Czechia and Slovakia to form a Ukraine-skeptic alliance. There’s a sense that it’s now or never. That means Commission officials are engaged in a delicate balancing act to get the assets plan across the line, three EU diplomats said. “This is diplomacy,” said one of the diplomats with knowledge of the choreography, granted anonymity to speak freely about the plans. “You offer people something they don’t want to do, so they accept the lesser option.” A second diplomat familiar with the situation was equally dismissive of plan B. “The idea that eurobonds could seriously be on the table is simply laughable,” they said. So although De Wever told his fellow leaders at the EU summit last week that the Commission had underestimated the complexity of using Russian assets and the legal knock-on effect it could have in Belgium, the EU doesn’t think he’ll hold out past December, when leaders are scheduled to meet again. The Russian asset-backed loan “is going to happen,” an EU official said. “Not a question of if ― but when.”  STEP UP SUPPORT Many European nations have long opposed the idea of eurobonds, believing they shouldn’t be on the hook for indebted governments they perceive as unable to keep their finances in order. The Covid pandemic weakened their resolve, with governments agreeing to joint borrowing to finance an €800 billion recovery fund to revive the bloc’s economy. Brussels has continued to mutualize EU debt since then to fund other initiatives, most recently involving a series of loans to help capitals procure military contracts to bolster their defenses against Russia, but capitals are still broadly against its widespread use. “Support for Ukraine and pressure on Russia, that is ultimately what could bring Putin to the table and that’s why it’s so important that the European countries step up,” Swedish Europe Minister Jessica Rosencrantz told reporters after Thursday’s summit. | Thierry Monasse/Getty Images There is a third option on the table: The EU could embark on a €25 billion treasure hunt for Russian assets in other countries across the bloc. This, though, is likely to take more time than Ukraine has so it could look as if Europe is taking its foot off the gas. “Support for Ukraine and pressure on Russia, that is ultimately what could bring Putin to the table and that’s why it’s so important that the European countries step up,” Swedish Europe Minister Jessica Rosencrantz told reporters after Thursday’s summit. COLLECTIVE RISK The vast majority of the assets are under the guardianship of a financial depository called Euroclear in Belgium, leaving the country with considerable financial and legal risk. “The Commission has engaged in intensive exchanges with the Belgian authorities on the matter and stands ready to provide further clarifications and assurances as appropriate,” a Commission spokesperson said. “Any proposal will build on the principle of collective risk sharing. While we see no indication that the Commission`’s original approach would lead to new risks, we certainly do agree that any risk coming with our future proposal will of course have to be shared collectively by member states and not only by one.” The Commission has played down the risks to Belgium, stressing that the €140 billion would only be repaid to Russia if the Kremlin ends the war and pays reparations to Ukraine. The chance of that happening is so remote that the money is unlikely ever to be repaid.  But Belgium fears Moscow could send in an army of lawyers to get its money back, especially considering the country signed a bilateral investment treaty with Russia in 1989. The officials and diplomats interviewed for this article remain confident of an agreement. “I really expect that at the next European Council [scheduled for Dec. 18] there will be finally progress,” Lithuanian Foreign Minister Kęstutis Budrys told POLITICO. Gerardo Fortuna contributed to this article.

Elisabeth Braw is a senior fellow at the Atlantic Council, the author of the award-winning “Goodbye Globalization” and a regular columnist for POLITICO. Seven years ago, Sweden made global headlines with “In Case of Crisis or War” — a crisis preparedness leaflet sent to all households in the country. Unsurprisingly, preparedness leaflets have become a trend across Europe since then. But now, Sweden is ahead of the game once more, this time with a preparedness leaflet specifically for businesses. Informing companies about threats that could harm them, and how they can prepare, makes perfect sense. And in today’s geopolitical reality, it’s becoming indispensable. I remember when “In Case of Crisis or War” was first published in 2018: The Swedish Civil Contingencies Agency, or MSB, sent the leaflet out by post to every single home. The use of snail mail wasn’t accidental — in a crisis, there could be devastating cyberattacks that would prevent people from accessing information online. The leaflet — an updated version of the Cold War-era “In Case of War” — contained information about all manner of possible harm, along with information about how to best prepare and protect oneself. Then, there was the key statement: “If Sweden is attacked, we will never surrender. Any suggestion to the contrary is false.” Over the top, suggested some outside observers derisively. Why cause panic among people? But, oh, what folly! Preparedness leaflets have been used elsewhere too. I came to appreciate preparedness education during my years as a resident of San Francisco — a city prone to earthquakes. On buses, at bus stops and online, residents like me were constantly reminded that an earthquake could strike at any moment and we were told how to prepare, what to do while the earthquake was happening, how to find loved ones afterward and how to fend for ourselves for up to three days after a tremor. The city’s then-Mayor Gavin Newsom had made disaster preparedness a key part of his program and to this day, I know exactly what items to always have at home in case of a crisis: Water, blankets, flashlights, canned food and a hand-cranked radio. And those items are the same, whether the crisis is an earthquake, a cyberattack or a military assault. Other earthquake-prone cities and regions disseminate similar preparedness advice — as do a fast-growing number of countries, now facing threats from hostile states. Poland, as it happens, published its new leaflet just a few days before Russia’s drones entered its airspace. But these preparedness instructions have generally focused on citizens and households; businesses have to come up with their own preparedness plans against whatever Russia or other hostile states and their proxies think up — and against extreme weather events too. That’s a lot of hostile activity. In the past couple years alone, undersea cables have been damaged under mysterious circumstances; a Polish shopping mall and a Lithuanian Ikea store have been subject to arson attacks; drones have been circling above weapons-manufacturing facilities; and a defense-manufacturing CEO has been the target of an assassination plot; just to name a few incidents. San Francisco’s then-Mayor Gavin Newsom had made disaster preparedness a key part of his program. | Tayfun Coskun/Anadolu via Getty Images It’s no wonder geopolitical threats are causing alarm to the private sector. Global insurance broker Willis Towers Watson’s 2025 Political Risk Survey, which focuses on multinationals, found that the political risk losses in 2023 — the most recent year for which data is available — were at their highest level since the survey began. Companies are particularly concerned about economic retaliation, state-linked cyberattacks and state-linked attacks on infrastructure in the area of gray-zone aggression. Yes, businesses around Europe receive warnings and updates from their governments, and large businesses have crisis managers and run crisis management exercises for their staff. But there was no national preparedness guide for businesses — until now. MSB’s preparedness leaflet directed at Sweden’s companies is breaking new ground. It will feature the same kind of easy-to-implement advice as “In Case of Crisis or War,” and it will be just as useful for family-run shops as it is for multinationals, helping companies to keep operating matters far beyond the businesses themselves. By targeting the private sector, hostile states can quickly bring countries to a grinding and discombobulating halt. That must not happen — and preventing should involve both governments and the companies themselves. Naturally, a leaflet is only the beginning. As I’ve written before, governments would do well to conduct tabletop preparedness exercises with businesses — Sweden and the Czech Republic are ahead on this — and simulation exercises would be even better. But a leaflet is a fabulous cost-effective start. It’s also powerful deterrence-signaling to prospective attackers. And in issuing its leaflet, Sweden is signaling that targeting the country’s businesses won’t be as effective as would-be attackers would wish. (The leaflet, by the way, will be blue. The leaflet for private citizens was yellow. Get it? The colors, too, are a powerful message.)

The European Union is about to use the cash value of €140 billion worth of frozen Russian state assets to finance a mega loan to Ukraine. But the European Commission still wants more, according to a document obtained by POLITICO. The bulk of the frozen assets sit in a Belgium-based financial depository called Euroclear. But an additional €25 billion lies in private bank accounts across the bloc, and the EU executive wants to discuss using those funds to issue loans to Kyiv as well. “It should be considered whether the Reparations Loan initiative could be extended to other immobilised assets within the EU,” reads the document, which the Commission circulated to EU capitals ahead of a Friday ambassadorial meeting on the topic. “The legal feasibility of extending the Reparations Loan approach towards such assets has not been assessed in detail,” the document continued. “Such an assessment would need to take place before taking a decision on further steps.” The document outlines the “design principles” for the Ukraine Reparations Loan initiative that will be up for debate ahead of next week’s EU summit in Brussels. EU leaders are expected to have a broad discussion on the initiative and to call on the Commission to present a proposal for the loan. EU officials expect the bill to arrive quickly, and to serve as a platform for further talks on the financial engineering needed to make it work. Finance ministers will discuss the bill when they next meet in November. GUARANTEES AND SPENDING TARGETS Other design principles include national guarantees for the loan, a key demand from Belgium, which fears Moscow could send an army of lawyers its way to retrieve the sanctioned cash. “A solid guarantee and liquidity structure should be put in place to ensure that the EU can always honour its obligations to Euroclear,” the document continued. “For that purpose, it is suggested to build a system of bilateral guarantees from Member States to the Union.” These guarantees would ensure “access to the required liquidity when needed to satisfy any guarantee call,” i.e. to enable an immediate payout. The EU’s next seven-year budget from 2028 would take over the national guarantees “with an adequate cover under the headroom,” a financial cushion that ensures Brussels can meet its obligations. Once the loan is issued, the money would go toward “the development of Ukraine’s defence technological and industrial base and its integration into the European defence industry,” as well as to support the country’s national budget, “subject to appropriate conditionality.”

Andrew Bailey is governor of the Bank of England and chair of the Financial Stability Board. As the G20 finance track meets in Washington amid a challenging global environment, it’s important to remember that multilateral institutions play a vital role in helping navigate troubled waters. But these institutions must be agile enough to refresh their approach to respond to the changing environment. Geopolitical tensions add to financial market vulnerabilities. Incomplete and inconsistent implementation of critical reforms across jurisdictions further exacerbates these vulnerabilities, and affects the financial system’s ability to withstand future shocks. Against this backdrop, multilateral institutions help foster the cooperation and coordination needed to find a way through these challenges and ensure global financial stability. The Financial Stability Board (FSB), which I chair, is one such example. Created by the G20 in response to the global financial crisis, the FSB advances global cooperation on financial regulation to improve the global financial system’s resilience and create the conditions necessary for sustainable economic growth. That objective matters for everyone — from Milan to Mumbai, Sapporo to Salvador. The reforms put in place by the FSB and other standard-setting bodies since 2009 have helped contain the fallout from more recent crises, including the Covid-19 pandemic, Russia’s illegal full-scale invasion of Ukraine and the swift resolution of the 2023 banking turmoil. The need for such global standards and cooperation is as clear today as it was 15 years ago — not just to prevent crises but because, ultimately, a resilient system allows for the efficient allocation of capital and supports G20 member economies in boosting growth. To maintain financial stability, however, policy development alone is not enough. We need the timely and consistent implementation of agreed reforms across jurisdictions. At the request of the G20 South African presidency, former Vice Chair of the Federal Reserve and former FSB Chair Randal Quarles has been asked to lead a review of reform implementations since the board’s creation, and his interim report will be submitted to the G20 next week. It shows that while we have seen intensified cooperation since the global financial crisis and made significant progress in areas like over-the-counter derivatives, full, timely and consistent implementation across the broad range of reforms hasn’t been achieved yet. But why does this matter? The FSB works hard to achieve consensus, and recommendations are adopted only when there is broad agreement among its members. Similarly, when the G20 endorses these recommendations, it reflects their collective perspective. Choosing not to implement weakens this consensus-building that is valuable for the global financial system. It also contributes to fragmentation, which weakens the resilience of markets by reducing their size and stability. This, in turn, increases the costs of cross-border activity, creates an uneven playing field and limits opportunities for risk management and diversification. This is true across the FSB’s work — from enhancing cross-border payments to managing cyber risk and establishing effective resolution regimes. Put another way, consistent implementation is the foundation of cross-border banking and capital markets, which can deliver better services to businesses and households. But in addition to implementation, we also need enhanced cooperation. As the financial system evolves, so too must our ambition for monitoring and responding to risks. Understanding risks and threats to the financial system is at the heart of the FSB’s mission, enabling us to identify vulnerabilities and respond with targeted evidence-based action. Whether it is the rise of private finance, the implications of geopolitical tensions, the impact of climate-related events or the increasing role of stablecoins, our ability to detect and address emerging threats is crucial. To this end, the FSB is committed to enhancing its surveillance capabilities too. Robust tools and data are essential for understanding vulnerabilities across the financial system, and for ensuring potential problems are addressed before they materialize. Jurisdictions can’t achieve financial stability alone. An interconnected system requires both global cooperation and engagement, as well as steadfast follow-through on agreed reforms. The FSB works in support of that fact, strengthening the financial system to create the conditions for sustained growth. In a world where global cooperation can feel increasingly under threat, the reality is we need more multilateralism — not less.

LUXEMBOURG — The EU will urge its G7 allies to use Russian frozen assets to issue their own reparation loans to Ukraine when the group’s finance ministers gather in Washington next week, according to the bloc’s economy chief Valdis Dombrovskis. “What we are discussing is the possibility for G7 members to apply a similar mechanism as reparations loans to Russian sovereign assets located in their territories,” the Latvian commissioner told reporters after a gathering of EU finance ministers in Luxembourg. “For example, U.K. and Canada have expressed interest following this European example.” The EU is still negotiating the financial engineering needed to finance a €140 billion reparations loan, but political momentum for the initiative is gathering, as Ukraine faces a budget shortfall of billions next year. The International Monetary Fund estimates that this shortfall will grow to $65 billion over the next two years. “It’s important that international donors, including also G7 donors … also contribute towards closing this financing gap,” Dombrovskis continued. “We’re expecting further discussion on those topics … during the IMF annual meetings next week.” France, Germany, and Italy have already pressured the U.S. and Japan in virtual meetings to follow Europe’s example of using the cash value of frozen Russian assets to finance a loan to Kyiv. Getting the world’s most powerful nations to act in unison would send a strong political message and avoid undermining the euro’s credibility on the world stage. Next week’s meeting of G7 finance ministers and central bank governors offers Europe’s powers the chance to make their case again in person.

LUXEMBOURG — Italy on Friday demanded assurances from the EU’s statistics office that national guarantees against a €140 billion loan to Ukraine won’t worsen their debt load and budget deficit, according to four diplomats. Giancarlo Giorgetti, the Italian finance minister, made his demands behind closed doors in Luxembourg, where he and his EU peers met to discuss the so-called reparations loan to Ukraine. The loan would use sanctioned Russian cash that’s sitting idle in a deposit account under the stewardship of Euroclear, a depository based in Belgium. That’s put the Belgian government in an awkward position amid concerns that Moscow could send an army of lawyers to retrieve the money. As a result, Belgium wants all EU capitals to guarantee the loan should the Kremlin’s lawyers prove successful in court, or should the war end, prompting an immediate recall. Rome wants its reassurances in writing from Eurostat that these guarantees won’t impact its financial health. Economy Commissioner Valdis Dombrovskis told Giorgetti that Eurostat would only be able to answer the question once the EU executive has presented a formal bill for the loan, two of the diplomats said. A senior Commission official told reporters earlier this week that it was likely that these guarantees would only count as contingent liability. In other words, the guarantee would only count toward a country’s debt pile if and when it’s triggered. The debt question is a general concern among EU countries. But the risk is more acute for Italy, whose burden of debt climbed to 137.9 percent of its economic output, known as GDP, in the first three months of this year. Only Greece has a higher debt load in the EU at 152.5 percent of GDP.

The EU’s big three in the G7 — Germany, France and Italy — are urging Japan and the U.S. to use frozen Russian assets to help Ukraine, just as Europe is now seeking to do. The European Central Bank fears using Russian assets could undermine the global credibility of the euro — but that concern could be allayed if heavyweights such as Washington and Tokyo were to take similar action. Three officials briefed on a virtual meeting of G7 finance ministers on Wednesday said the EU trio had urged the whole group of world leading economies to act in unison on the assets. But the final communiqué stopped short of pledging joint action. Instead, it said that using Russian assets was one of the options under consideration. The G7 ministers said they were “developing a wide range of options to address Ukraine’s financing needs,” which “amongst others … include using, in a coordinated way, the full value of the [Russian sovereign assets] immobilized in our jurisdictions to end the war.” The EU’s plan, not yet accepted by all member countries, would be to deploy €140 billion of frozen Russian assets as a zero-interest “reparations loan” to Kyiv. The White House is pressuring the EU to make use of its stock of Russian central bank reserves, but has yet to say whether it will do the same with the some $7 billion it holds domestically. Japan is also cautious about issuing a reparations loan to Ukraine using its own frozen Russian assets. That said, Japan is expected to follow Washington’s lead. “It’s unclear what the Americans are going to do,” one official briefed on the G7 call said on the condition of anonymity to speak freely. The next G7 meeting among finance ministers is scheduled for Oct. 15 in Washington, where policymakers will head for the International Monetary Fund’s annual meeting. The U.K. said last month that it’s considering using billions of pounds worth of sanctioned Russian cash to finance new loans to Kyiv. Canada is also “very aligned” with the EU’s initiative, its finance minister told POLITICO on Sept. 20. Most of Russia’s frozen assets, however, reside in the EU, leaving Europe carrying most of the legal and reputational risk. The European Central Bank is concerned about any seizure and on Tuesday again called on the European Commission, during a virtual meeting of deputy finance ministers, to demonstrate how the reparations loan will not damage the euro’s credibility, two diplomats on the call said. The Commission is confident that national guarantees from EU countries against the €140 billion loan will be enough to allay any legal concerns. That way, the money would be repaid to Moscow immediately if the Kremlin ends its war against Ukraine and pays reparations. To reassure its allies, Brussels even plans to set aside €45 billion of Russian cash to repay a previous G7 loan to Ukraine, agreed in 2023 and almost paid out.

BRUSSELS — Discussions among the EU’s top policymakers have rapidly shifted to how seizing €140 billion in frozen Russian assets can best support Ukraine’s war against Moscow. The top priority: allowing Kyiv to buy weapons. Specifically, European weapons. The past weeks have seen a dramatic U-turn in political momentum toward sending Russia’s blocked assets in Europe to Ukraine — after years of arguments that the frozen cash should remain untouched, with only the interest being creamed off to help Kyiv. Now Europe’s leaders are warming to the idea of granting a zero-interest “reparations loan” to Kyiv that should ensure the money is used to buy arms from European manufacturers. “We need a more structural solution for military support and this is why I have put forward the idea of a reparations loan that is based on the immobilized Russian assets,” European Commission President Ursula von der Leyen said Tuesday alongside NATO chief Mark Rutte. “We will strengthen our own defense industry by ensuring that part of the loan is used for procurement in Europe and with Europe.” Discussions will come to a head during an informal summit of EU leaders in Copenhagen on Wednesday that will focus on how to spend the sanctioned Russian cash and prevent Kremlin-friendly countries, namely Hungary and Slovakia, from vetoing the plan. German Chancellor Friedrich Merz’s idea of pressing Ukraine to use the loan to purchase EU-made weapons — as opposed to rebuilding the country’s devastated infrastructure — attracted support from across the Union, according to four officials and diplomats. The logic of weapons over reconstruction was clear. “If Ukraine loses the war, there will be nothing to rebuild,” said one EU diplomat who, like others quoted in this article, was granted anonymity to speak freely. While France remains cautious on the legal aspects of the Ukraine loan, it supports Merz’s push to steer the funding toward EU-made military kit, according to an official from French President Emmanuel Macron’s office. In a further boost, a letter from Sweden and Finland advocates using the €140 billion loan to “contribute to European security and defence capabilities by integrating Ukraine further into European cooperation.” The two Nordic nations stressed the importance of industrial cooperation and said “providing Ukraine with modern military equipment in all domains, based on Ukraine’s needs, is an important part of Europe’s reassurance measures.” The EU’s souring relations with the U.S. under President Donald Trump have redoubled the bloc’s efforts to look after itself and shore up support to Kyiv. But other countries are less interested in the military dimension of the loan — and are pushing for Ukraine to have free rein over how to spend the money. “Ideally [the loan] would be budget support with which Ukraine could decide what to do,” said a senior EU diplomat. “The less earmarking there is on the loan the better it will be.” The Commission suggested in a written note on Thursday that Ukraine should use the loan to buy European weapons as well as to cover its ordinary budget support — leaving it to leaders to decide on the exact split. Kyiv is desperately short of money to keep the Russian army at bay, and leaders have just months to find the cash needed for Ukrainian troops. The frozen funds are currently sitting idle in a deposit at the European Central Bank under the guardianship of Euroclear, a financial institution based in Belgium. SETTING A PRECEDENT Deputy finance ministers are still trying to understand the “creative” financial engineering needed to finance the loan, and will be debating the initiative over virtual meetings throughout the week. Finance ministers will take up the debate when they meet in Luxembourg Oct. 10. A big sticking point, especially for Belgium, is whether the Commission’s legal reasoning behind the cash grab will hold up in court after Russia’s former president threatened to sue any “euro-degenerates” who dare touch Moscow’s “property.” The other big question is whether Brussels can use a statement by EU leaders from December to change the sanctions approval rules from unanimity to a qualified majority, thereby cutting Bratislava and Budapest out of the decision-making process.  Lawyers from the Council of the EU told the deputy finance ministers on Tuesday that all legal concerns could be addressed, two people on Tuesday’s call said — a sentiment that is generally shared by Armin von Bogdandy, director at the Max Planck Institute for Comparative Public Law and International Law. “The text does not say which conditions are applicable for qualified majority voting. So, we’re still in high waters,” said von Bogdandy, who wrote over the summer about overcoming the Hungarian veto when it comes to EU sanctions. “But I see that such an argument is possible,” he said, noting that the EU treaties allow qualified majority voting in extreme situations, such as when “a member state goes squarely against basic EU solidarity.” For the Commission to gather enough support, it will need to make a legal argument that doesn’t set a precedent with far-reaching consequences. “They’ll negotiate the legal reasoning … so that member states can say we see that this is very important, in this very narrowly subscribed situation,” von Bogdandy said. “It makes perfect and legitimate sense.”

BRUSSELS — Hungarian Prime Minister Viktor Orbán is standing in the way of the EU’s plan to seize €140 billion of sanctioned Russian assets and lend them to Ukraine. But the European Commission thinks it’s found a legal workaround to cut Hungary out of the decision-making process. Ordinarily, a measure as dramatic as Brussels’ plan to seize Moscow’s reserves would require unanimity among the 27 member countries — effectively granting a veto to Orbán, the EU leader closest to Russian President Vladimir Putin. Given Orbán’s long track record of seeking to obstruct sanctions against the Kremlin, EU legal experts are working on a scheme to ensure that the decision on the proposed “Reparation Loan” to Ukraine can be taken by a qualified majority instead. Four people briefed on the plans told POLITICO the Commission is hoping to base its action on a set of European Council conclusions that all EU leaders, including Orbán, agreed to on Dec. 19 last year. In that statement, the leaders declared: “Russia’s assets should remain immobilised until Russia ceases its war of aggression against Ukraine and compensates it for the damage caused by this war.” At the time, that statement had largely been understood to mean the assets themselves should remain frozen, mainly at Euroclear bank in Belgium, and not accessed by Russia, while interest could be used for the war effort. The Commission’s new argument is that this statement provides sufficient cover to change the sanctions rules from unanimity to a qualified majority. For that to work, all or most of the other countries would have to agree. “This would require a high-level political agreement by all or most Heads of State or Government,” the Commission said in a note to EU ambassadors meeting on Friday. NOT JUST HUNGARY Winning that broader agreement will not be easy. There are other Russia-friendly nations in the potential mix, such as Slovakia. Then there’s the Belgium problem. The Belgian government has already pushed back amid concerns that the EU’s cash grab could expose Belgium and Euroclear, a financial institution that houses Russia’s frozen state assets, to legal retaliation from Moscow. “Taking Putin’s money and leaving the risks with us. That’s not going to happen, let me be very clear about that,” said Prime Minister Bart De Wever in New York on the margins of the U.N. General Assembly. “If countries see that central bank money can disappear if European politicians see fit, they might decide to withdraw their reserves from the eurozone.” Still De Wever conceded he was willing to discuss the matter, and Belgium is broadly supportive of measures against Putin, unlike Hungary and Slovakia. The key offer of reassurance to the Belgians is likely to come in the form of other EU countries stepping in to replace the Euroclear assets sent to Kyiv with jointly underwritten IOUs. EU leaders are meeting next week in Copenhagen, where discussions around the loan are planned. No formal decisions will be made — that is set for the summit at the end of October, after finance ministers have had a chance to dig into the proposal in Luxembourg on Oct. 10. “The goal [in Copenhagen] is to gather sufficient support from other countries to isolate Orbán,” an EU diplomat said on the condition of anonymity to speak freely. “We’re in the gray area.” Germany, Spain, Poland, and the Baltic countries bordering Ukraine are key supporters of the Commission’s plan. But France and Italy have been previously cautious about any innovative ideas to use the immobilized state assets. Hungary’s Secretary of State for International Communication, Zoltán Kovács, did not respond to requests for comment. BRUSSELS’ €140-BILLION BET The bulk of Russian state assets have been frozen at Euroclear since Putin launched a full-scale invasion of Ukraine in February 2022. A large part of them were invested into Western government bonds that have matured into cash. This cash currently sits in a deposit account with the European Central Bank. Brussels has previously toyed with the idea of using the frozen assets, but previous attempts to use the sanctioned cash were met with strong political resistance. The Reparations Loan would be disbursed in tranches and used for “European defence cooperation” and “to cover budget needs,” the Commission said in a note. A veto from Budapest would effectively hand the Russian cash back to Moscow, leaving capitals on the hook to pay back the loan. The new workaround would reduce this risk. But several countries are worried that using old political statements to dictate future policy will set a dangerous precedent. “Hungary has sufficient grounds to mount a legal case,” said a second EU diplomat. Another one said that “if the skeptics don’t flip, there is no Orbán question.”