Listen: Belgium, Slovakia and Norway will determine the EU’s reparations loan plan

The EU has been working on a plan to use frozen Russian state assets to help keep Ukraine afloat. Since Russia’s invasion in 2022, around €185bn in Russian assets have been immobilised in Europe, most of them sitting at Euroclear, a huge securities depository based in Belgium. But why is the EU’s plan to use these frozen assets hitting a wall?

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So we know that the EU has been working on a plan to use frozen Russian state assets to help keep Ukraine afloat. Since Russia’s invasion in 2022, around €185bn in Russian assets have been immobilised in Europe, most of them sitting at Euroclear, a huge securities depository based in Belgium. But, why is the EU’s plan to use these frozen assets hitting a wall?

The European Commission’s preferred idea is called the Reparations Loan. It would use those frozen funds as collateral. The EU would issue bonds, effectively borrowing against the Russian money, and send the proceeds to Ukraine. Kyiv would only have to repay the loan once it receives reparations from Russia, meaning the scheme would act like a grant until then.

But the plan is stuck. Belgium, which hosts Euroclear, wants firm guarantees from other EU capitals. It fears that if Russia sues and wins, Belgium could be forced to reimburse Moscow within three days, potentially more than €100bn. Belgian officials also want a stronger legal base to protect Euroclear and have asked other EU countries holding Russian assets to share responsibility.

Then there’s Slovakia. Yesterday, prime minister Robert Fico said his government won’t take part in any “legal or financial schemes” that could fund Ukraine’s military efforts. Hungary is expected to maintain the same stance.

Without a legal workaround, either country could block the plan when EU sanctions on Russia come up for renewal every six months, sending the assets straight back to Moscow.

Finance ministers will revisit the issue at this month’s Ecofin meeting in Brussels, but time is running out. Ukraine’s finances could hit breaking point by spring.

Meanwhile, Norway’s finance minister, Jens Stoltenberg, will visit Brussels this week to discuss possible support measures. Some economists have suggested Norway could use its giant sovereign wealth fund to guarantee the reparations loan, though officials say that’s unlikely.

Now, the standoff reveals just how difficult it is for the EU to balance legality, politics, and principle.
Under international law, sovereign assets are protected by something called immunity from enforcement. That means the EU can freeze Russian funds, but seizing or spending them could violate global norms, and invite retaliation.

Russia has already warned that any such move would be “illegal” and promised a “painful response”. And Belgium has reason to worry: Moscow has a 1989 investment treaty with Belgium and Luxembourg that allows it to challenge confiscation in international courts. A Russian banker is already suing Luxembourg for damages under that very agreement.

At the same time, the economic context is tough. Many EU countries are still carrying heavy post-pandemic debt. Slovakia’s debt has reached 88 percent of GDP, making it reluctant to guarantee anything linked to Ukraine’s war funding.

What’s next?

EU leaders will meet again in mid-December. The Commission is expected to present a revised version of the Reparations Loan, possibly with new legal safeguards and shared guarantees to ease Belgium’s concerns.

An alternative idea, the Debt-Claim Model, is also gaining attention according to the EU Observer. It would allow Ukraine to transfer its claim for war reparations directly to the EU. Brussels could then legally recover the money from frozen Russian assets once the war ends. Some lawyers say it’s a cleaner, more transparent mechanism, but it’s still untested and complex.

If the EU fails to reach a deal, it may have to borrow the money itself, a far less appealing option that would add to national debts and require governments to pay interest, either from their own budgets or from future EU funds.

For now, all eyes are on Belgium, Slovakia, and Hungary, three small countries holding up a very big decision. Because unless they move, the EU’s promise to “stand with Ukraine for as long as it takes” may soon meet its financial limit.