"EU loan for Ukraine could scare away investors"/ Euroclear highlights legal obstacles to using Russian assets
The European Union's plan to issue a reparations loan for Ukraine suffered a new setback on Friday after Euroclear, the main custodian of Russian fixed assets, said the proposal is "very fragile," highly unpredictable and could trigger an exodus of foreign investors away from the eurozone.
“The proposal, as it currently stands, has many legal innovations,” a Euroclear spokesman said. “Such an innovation raises many questions. We have the impression that the construction of the plan is currently very fragile.”
Euroclear is a central securities depository based in Brussels, where the bulk of Russian assets are held. This makes Belgium a key factor in the debate over how to finance Kiev's budgetary and military needs.
“While we support the objective of assisting Ukraine, this initiative could have very significant legal, financial and reputational risks for Euroclear, Belgium, the European Union and its financial markets,” the spokesperson added.
Under the scheme, the European Commission would use frozen assets of the Russian Central Bank to create a zero-interest credit line for Ukraine. Kiev would be required to repay the loan only after Moscow agreed to compensate for the damage caused by the war. Analysts suggest that the chances of Russia ever agreeing to pay reparations to its neighbor are almost zero.
The EU aims to cover €90 billion of Ukraine's €135 billion financial gap over the next two years using those assets. This requires the Belgian side's approval. The proposal, which has no precedent in modern history, has been met with strong reservations by the Belgian government from the start. Euroclear also worries that it may not have the liquidity needed to meet the demand on the Russian Central Bank if sanctions are lifted early and member states fail to raise the €185 billion in time.
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