According to the findings of “FT”, the ECB's analysis indicated that the proposed mechanism would involve the central bank in political and financial activities beyond its powers. Earlier, ECB President Christine Lagarde criticized the idea of using frozen assets, arguing that this could damage the credibility of the euro, scare off investors and undermine the financial stability of the euro area.
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In particular, potential claims from third countries are a risk a precedent for using funds from foreign central banks for geopolitical purposes.
EU plan: 'no confiscation' loan
The European Commission wanted to push through a solution enabling the use of approximately EUR 180 billion of Russian assets held in the Belgian clearing house Euroclear. The mechanism assumed concluding a loan agreement with the EU at 0 percent. The EU would use access to assets as collateral for financial support to Ukraine. Kyiv would repay this loan only if it receives war reparations from Russia. Formally, there would be no takeover of Russian property.
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From the beginning, such a plan aroused resistance from Belgium, which was afraid of lawsuits and retaliation from Moscow. EU authorities have repeatedly signaled that they do not want to expose Euroclear to legal risk.
The US is pushing for its own model
Parallel United States they are pushing for alternative uses of frozen funds. According to information from Washington's negotiations with Moscow, the 28-point plan included the idea of the US taking over $100 billion. Russian assets – intended for the reconstruction of Ukraine.
The remaining part would go to a joint Russian-American investment fund. The American proposal put pressure on the EU to speed up work on its own solution before Washington takes the initiative.
What next with Ukraine's support? Brussels announces a new proposal
In the face of the ECB's opposition, the European Commission must look for alternative paths. The head of the European Commission, Ursula von der Leyen, announced that she would present a specific legislative proposal this week. If the EU does not find a legal tool acceptable to all institutions – especially the ECB and the Belgian authorities – the “reparations loan” project may stall.
