By Jan Strupczewski and Andrew Gray
BRUSSELS, Dec 18 (Reuters) – European Union leaders will try to agree on how to lend billions of euros of desperately needed cash to Ukraine in a meeting on Thursday that is seen as a critical test of the group’s strength in the wake of U.S. President Donald Trump calling them weak.
The EU sees Russia’s war as a threat to its own security and wants to keep Ukraine financed and fighting.
The European Commission has proposed using frozen Russian central bank assets that are mostly held in a Belgian clearing house to secure a huge loan to Kyiv, but Belgium is concerned the plan is not legally watertight while other states including Italy have expressed concern.
EU leaders arriving at the summit said it was imperative they find a solution.
“Now we have a simple choice – either money today or blood tomorrow. And I am not talking about Ukraine only I am talking about Europe,” Polish Prime Minister Donald Tusk said. “This is our decision to make and only ours.”
European Commission chief Ursula von der Leyen said she would not leave the summit without agreement on how to finance Ukraine over the next two years.
Ukrainian President Volodymyr Zelenskiy is due to participate at the summit in person. He had previously been expected to join by video call, underlining the urgency of the situation as seen from Kyiv.
BELGIUM WANTS MORE GUARANTEES ON RISK SHARING
Belgian Prime Minister Bart De Wever told his country’s parliament early on Thursday that he had not yet seen guarantees that answered his concerns on legal and liquidity risks and that financing plans were still changing “as we speak”.
Russia’s central bank has said the EU plans to use its assets are illegal and reserved the right to use all available means to protect its interests. It filed a lawsuit in Moscow this week seeking $230 billion in damages from clearing house Euroclear.
The stakes are high because without the EU’s financial help Ukraine will run out of money in the second quarter of next year and most likely lose the war to Russia, which the EU fears would bring closer the threat of Russian aggression against the EU.
“It would also have severe implications for the credibility of Europe and underline that we are as weak as Trump apparently thinks we are,” a senior EU diplomat said.
REPARATIONS LOAN IS “ONLY GAME IN TOWN”
One of the financing options could be for the EU to borrow the needed amount against the security of the EU budget and then lend the money on to Ukraine, but such a move would require unanimity among the 27 EU countries and Moscow-friendly Hungary has already said it would veto it.
Another option would be for each willing EU country itself to raise money on the market and pass it on to Kyiv, but that would mean a rise in the already high debt and deficit levels and a lack of longer-term financing certainty for Ukraine.
Diplomats said the use of the Russian assets was therefore in practice “the only game in town” and favoured by most countries because it ensured a large sum for Ukraine without increasing national debts or any immediate fiscal effort.
But to use it, EU leaders first need to convince Belgium, which holds 185 billion euros of the total 210 billion euros frozen in Europe, that they will not leave it alone with the bill if Russia successfully sues in international courts over the plan.
Most EU countries are willing to give such guarantees. But De Wever argues that because damages awarded to Russia in a successful court case could far exceed the amount held by Belgium and the trial could take place years from now, he effectively needs a blank cheque from other states for an indefinite period.
The discussions among leaders on Thursday will focus on narrowing down the scope of the guarantees to a form that would also be acceptable to other EU countries, diplomats said, stressing a financing solution for Ukraine will be found.
“This is not a European Council where we can part ways on Friday and not have anything,” another senior EU diplomat said.
“So a solution will be available on Friday morning.”
(Additional reporting by Lili Bayer, Inti Landauro, Phil Blenkinsop, Julia Payne, John Irish, Bart Meijer, Benoit Van Overstraeten, Andreas Rinke, Alan Charlish; Writing by Jan Strupczewski and Ingrid Melander; editing by Richard Lough)
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