Semafor Signals
EU looks to own budget as collateral for Ukraine loan amid concerns over US plans
Insights from Politico, the Financial Times, and the Atlantic Council
The News
The European Union is mulling using interest payments from frozen Russian assets to provide Kyiv with a multibillion-dollar loan, with its own budget as collateral, in a move that would allow it to send money to Ukraine independently of the United States.
The plan is still under discussion ahead of next week’s G7 summit as while some EU officials have voiced concerns over Washington’s separate proposal on Western governments jointly securing the loan, others prefer this option than the EU going alone, Politico reported.
SIGNALS
Loan terms needs buy-in from all EU nations
EU member states would have to unanimously agree on the terms of any loan agreement for Ukraine — a big ask for nations like Hungary, which are sympathetic to Moscow. Further complicating matters is that under the US proposal, sanctions on Russian assets would need to be renewed every six months, again with unanimous agreement from the bloc. That “would give any government in the bloc a chance to halt the scheme, with potentially ugly consequences for Ukraine and western credibility,” the Financial Times’ Henry Foy noted.
EU officials leaning towards joint deal with US
European finance ministers seem to be angling for a joint loan with the US rather than one that comes solely from the EU, Politico reported, while the EU’s budget-backed loan remains up for discussion. Washington’s plan would see up to $50 billion raised for Kyiv through interest on frozen Russian assets. Significant legal hurdles still remain, however: It is not clear exactly “what happens if the war ends and Russia reclaims its assets, potentially leaving EU countries with a huge chunk of the bill to pay the loan back,” Politico noted.
G7 should agree to best possible deal right away
Disagreements over the way the US plan would play out has held up additional funding to Ukraine, which has been hammered by a fresh Russian push on its eastern front. Delaying a deal means a more precarious situation for Kyiv in the weeks and months ahead, argued the Atlantic Council fellow Daniel Fried. “Peacetime norms must give way to norms suited to the harsher era that is upon us, whether we like it or not,” he wrote. “Those European opponents of using Russia’s assets to pay for Russia’s war of aggression should reconsider.”
