A crucial moment for Europe: The EU leaders' summit on Thursday was a high-stakes affair, with critics urging the bloc to assert its power and relevance in the face of US-Russia tensions. For Ukraine, the outcome was a matter of survival, as the Trump administration pressured President Volodymyr Zelensky to accept a peace plan, with the threat of US disengagement looming.
"If the US withdraws its support, Ukraine's fate is sealed," warned a senior EU source.
The proposed US-Russia deal, which involved turning frozen Russian assets into a massive signing bonus, sparked controversy. Jim O'Brien, a fellow at the European Council on Foreign Relations, warned that if Europe didn't act, Donald Trump would.
"The US-Russia plan puts those assets up for grabs, under their direction. Europe's presence at the table is the only question," he said.
Would EU leaders rise to the challenge?
A significant portion of Russia's central bank assets, totaling around €210 billion, were immobilized shortly after the invasion in February 2022. Most of these assets, approximately €185 billion, were held in a Belgian securities depository, Euroclear.
The idea of confiscating these assets had long been taboo, but by summer, discussions shifted towards using them to fund a long-term loan for Ukraine's financial and military needs. The loan would only be repaid once Russia started paying war reparations.
Commission President Ursula von der Leyen proposed the Reparations Loan idea in her State of the Union speech, and it gained momentum with an unexpected op-ed by German Chancellor Friedrich Merz.
Most EU member states, including Ireland, supported the plan, but Hungary and Slovakia, with their friendly ties to Moscow, opposed it.
Belgium, however, raised concerns about the potential legal repercussions. They argued that using the Russian assets held in Euroclear to fund Ukraine could expose the country to hostile legal action from Russia, potentially resulting in a liability of tens of billions of euros.
At an October summit, EU leaders pledged to meet Ukraine's funding needs and tasked the Commission with proposing solutions. On November 17, the Commission presented three options: joint EU debt backed by unused budget funds, direct bilateral loans from member states, and the Russian assets plan.
By December 3, the Commission focused on legal texts for the joint debt and Russian assets plans.
During discussions, it became clear that the joint debt option was not feasible. Using EU budget funds to raise a substantial loan would require a change in budget legislation, and given that the money was intended for a third country, unanimity was necessary. Hungary's veto stood in the way.
Belgium, however, continued to advocate for joint debt, citing its clarity, predictability, and cost-effectiveness.
At summits in Copenhagen and Brussels, Belgian Prime Minister Bart de Wever insisted on touching the Russian assets only if all member states shared the risk and if other countries with immobilized assets followed suit.
"If not, I'll do everything in my power, politically and legally, to stop this decision," Mr. De Wever declared.
Talks between the Commission and Belgium intensified, with concerns arising over the open-ended guarantees demanded of other member states. If a Belgian company's assets were seized in Moscow, would all member states bear the cost?
Legal experts debated the matter beyond Brussels' corridors. While outright confiscation was seen as legally questionable, and using the assets to fund Ukraine could jeopardize the eurozone's reputation as a safe haven for sovereign wealth, the majority believed that Russia, given its daily violations of international law since the invasion, would face an uphill battle in any international tribunal.
Even if Russia pursued a case under the UN Convention on state property immunity, it would have to go to the International Court of Justice (ICJ), a court whose jurisdiction Russia does not recognize.
Furthermore, Russia's ICJ appearance could open the door to an even larger claim by Ukraine. "If Russia could argue that Belgium is somehow liable for €185 billion, Russia would be liable for €500 billion or €600 billion for damages caused to Ukraine," a lawyer explained.
In a White Paper circulated in early December, the international law firm Covington & Burling concluded that many violations of international law cannot be challenged before an international adjudicative body due to the absence of a court with general jurisdiction over such matters.
Russia has exploited this loophole for years to evade accountability for its unlawful occupation of Crimea since 2014, its covert invasion of Ukraine's Donbas region, and its full-scale invasion in February 2022.
Belgian officials felt their concerns were not taken seriously. Mr. De Wever likened the situation to buying a plane ticket: the risk of a crash is small, but the consequences are catastrophic.
"Stealing another country's frozen assets, its sovereign wealth funds, is unprecedented. This is Central Bank of Russia money. Even during World War II, German funds were only frozen, not confiscated," he said.
As the summit approached, Belgian officials intensified their engagement with the European Commission. While diplomats acknowledged that the EU was taking Belgium's concerns more seriously, their demands remained unchanged.
On December 15, Russia's central bank filed a €190 billion lawsuit against Euroclear in Moscow. Even though the lawsuit might not be actionable in the EU, the central bank planned to seek jurisdiction in a "friendly" country.
This prompted Belgium to strengthen its demands. EU leaders would have to agree to fully mutualize the risk and provide coverage against all possible types of litigation. Russian retaliation was no longer a risk but a certainty. Officials noted that the damages claim exceeded Euroclear's balance sheet by €10 billion.
EU ambassadors met almost daily to discuss the Reparations Loan.
Member states agreed to close a key loophole: the Hungarian veto. Since EU sanctions must be renewed by unanimity every six months, a veto from Hungary's Viktor Orban could derail the loan. To mitigate this risk, member states invoked emergency legislation - Article 122 of the Lisbon Treaty - to ensure the Russian assets remained frozen until war reparations began.
Belgium supported this move but wanted Article 122 invoked for the joint debt option as well. This option had been shelved due to the unanimity requirement. Why not use Article 122 to bypass Hungary's veto in this context?
Belgium found an unexpected ally in ECB President Christine Lagarde.
An EU diplomat reported that at a finance ministers' dinner on December 12, Lagarde suggested, "If Article 122 can be used for sanctions law, surely it can be used for issuing debt against the EU budget headroom?"
The idea was presented to the legal services of the European Commission and the Council of the European Union, but the verdict was negative: such a move would require changing EU budget law and involve the European Parliament.
As the summit neared, Belgian officials acknowledged progress but highlighted the main problem: if the risk of a successful litigation payout for Russia was unlimited, other member states' guarantees could not be capped.
Italy, Bulgaria, and Malta began expressing reservations about the Reparations Loan. Officials said these countries would drop their concerns if Belgium was on board.
As leaders arrived for the summit, Polish Prime Minister Donald Tusk emphasized the gravity of the situation: "It's money today or blood tomorrow. I'm not talking about Ukraine; I'm talking about Europe."
The Guardian reported that Belgian politicians and finance executives had been subjected to intimidation by Russian military intelligence.
Officials considered using the Qualified Majority Vote to bypass Belgium's objections, a serious breach of the European Council's sacrosanct rule. Denmark's Prime Minister Mette Frederiksen expressed her readiness for such an outcome.
To avoid this scenario, the focus shifted to providing the guarantees Belgium demanded. President Zelensky met with Bart de Wever, warning that Ukrainian drone production would suffer without a loan.
As leaders convened, President of the European Council António Costa's plan was to keep them focused on other agenda items while technical teams worked on the loan.
After lunch, Donald Tusk informed reporters that the Russian assets-based Reparations Loan was the only viable option.
However, the revised text, a result of technical discussions, was only given to leaders before dinner, leaving them with little time to review it.
Senior sources described the new text as startling, with seemingly unlimited guarantees for Belgium and compensation for Belgian companies whose assets might be seized in Russia. For leaders who had ordered their companies to withdraw from Russia, this was unacceptable.
By that evening, it was clear the Reparations Loan was too complex and unacceptable for Belgium. Costa then suggested revisiting the joint EU debt option, which was almost ready to go, unlike the 15-hour effort for the loan.
At 3 a.m., the deal was struck.
Instead of invoking Article 122, the joint debt plan, worth €90 billion over two years, would use enhanced cooperation to bypass unanimity. Hungary, Slovakia, and the Czech Republic did not object, provided they were not liable for the debt.
The Russian assets would remain frozen, potentially usable by the EU to repay borrowed money if Russia failed to make war reparations.
President Costa and Commission President Ursula von der Leyen celebrated Europe's unity and delivery. President Zelensky praised the deal on X, saying it strengthened Ukraine's resilience and ensured financial security for the coming years.
Taoiseach Micheál Martin expressed disappointment over the unused Russian assets but understood Belgium's concerns.
"I think people will realize the enormity of the death and destruction in the aftermath of the war," he said. The loan, smaller than the EU's Covid recovery fund, was Europe's price for Russia's war.
The Kremlin gloated, with Kirill Dmitriev, President Vladimir Putin's special envoy, posting, "Major BLOW to EU warmongers led by failed Ursula - voices of reason in the EU BLOCKED the ILLEGAL use of Russian reserves to fund Ukraine."
Despite the Kremlin's triumph, the EU loan reduces one burden for Ukraine's leadership as talks with US and EU officials continue. The horrific death toll fuels growing calls for an end to the war, but EU officials remain uncertain about Vladimir Putin's private sentiments, despite his combative public rhetoric.
