Belgiumʼs refusal to support the EUʼs multi-billion-dollar "reparations loan" for Ukraine could prompt the International Monetary Fund to block financial assistance to Kyiv.
Politico writes about this, citing sources.
Ukraine is facing a large budget deficit and is in dire need of financing from the IMF, which is considering providing Kyiv with $8 billion over the next three years.
However, hopes of receiving financial support from the IMF depend on whether the EU can approve a €140 billion “reparations loan” to Ukraine using frozen Russian state assets, most of which are stored in Belgium.
A European Commission official and diplomats from three member states noted that reaching such an agreement would convince the IMF of Ukraineʼs financial viability in the coming years — a necessary condition for the Washington institution to provide funds to any state.
But Belgium opposed the loan last month at a meeting of EU leaders, citing financial and legal risks, reducing the chances of a deal being struck in time for a key IMF meeting scheduled for December.
“We are facing a timing problem,” said one EU official, noting that the next meeting of EU leaders is only scheduled for December 18-19.
As the US has significantly reduced its support for Ukraine, the IMF expects the EU to shoulder the main financial burden in the coming years.
Although the size of the IMF program for Ukraine is relatively small, its approval signals to investors that the country is financially stable and continuing its reforms.
What is a "reparation loan"?
The possibility of providing Ukraine with a €140 billion loan using frozen Russian assets has been discussed since early October. At that time, EU leaders were unable to agree on the loan — Belgium opposed it, and France and Luxembourg were concerned about the legal consequences.
The European Commission has proposed providing Ukraine with a loan using Russian state assets held in Euroclear, a Belgian financial institution. Under the plan, if Russia refuses to pay reparations to Ukraine after the war, it will lose rights to these assets.
Belgium opposed the plan out of concern that Russia would sue it if it went ahead. Belgian Prime Minister Bart de Wever asked the other 26 EU countries to guarantee coverage of legal and financial risks.
Politico reported on October 21 that EU ambassadors had tentatively agreed on a plan to provide a “reparations loan” for Ukraine. However, at a meeting on October 23, EU leaders did not agree to allocate the loan and postponed the issue until December.
Meanwhile, according to Bloomberg, Russia has prepared a response to the Westʼs possible "reparations loan" to Ukraine — it will nationalize foreign assets.
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