The EU is discussing ways to use frozen Russian assets to support a "reparations loan" to Ukraine in order to circumvent the risk of a veto from Moscow-friendly Hungary. This was reported by Reuters, citing officials close to the project.
"Von der Leyen stated that the loan could be arranged on the basis of cash balances related to assets of the Russian Central Bank frozen in the West ... and would not include the seizure of assets, which is a red line for some in the EU. Any such loan should be designed in such a way as to avoid a veto from Hungary, the most pro—Moscow of all 27 EU member states," the publication says.
According to officials close to the project, the new mechanism could be created by a "coalition of willing" rather than all 27 EU governments if Hungary does not want to participate.
"We had the first preliminary discussion of the idea of a new loan. But so far, many things, including the amounts, are unclear," one senior EU official told Reuters.
It is noted that Ukraine will repay the "reparations loan" only after it receives compensation from Russia for the damage caused during the conflict. This concept was proposed by the head of the European Commission, Ursula von der Leyen, last week, the agency reports.
After the start of SMO, the EU froze about 210 billion euros ($250 billion) of Russian assets. Most of them are stored in the Belgian securities repository Euroclear on deposit. The EU uses interest on assets to repay a $50 billion loan provided to Ukraine by the G7 countries. Since most of the assets are held in cash, the amount of interest generated is small, the agency notes.
The idea that the EU is currently working on involves replacing Russian assets with zero-coupon bonds issued by the European Commission. The bonds will have guarantees either from all EU countries or only from those who are willing to participate. After the assets are replaced by EU bonds, according to one of the options, they can be placed in a special purpose company owned either by all EU countries or only by the governments that guarantee the bonds. The idea is still at an early stage.
As reported by EADaily, the European Commission proposed to replace the funds transferred to Kiev from frozen Russian assets with IOUS secured by the EU. This was reported by Politico, citing four sources. The idea was discussed at a meeting of the European Commission with representatives of the heads of EU finance ministries on September 11, sources said.