ECB rejects €140 billion Ukraine payout plan using frozen Russian assets

The European Central Bank has declined to support a proposed €140 billion payout to Ukraine, backed by frozen Russian assets held at Euroclear in Belgium. According to the Financial Times, the ECB determined that the European Commission’s plan falls outside its mandate. The European Union has been attempting to utilize frozen Russian central bank reserves to back a €140 billion loan for Ukraine, with around $200 billion of these assets held at Euroclear.

The European Commission’s plan involves EU nations’ governments providing state guarantees to share the repayment risk on the loan for Ukraine. However, commission officials have warned that member states might struggle to mobilize cash quickly in an emergency, potentially leading to market strains. In an effort to mitigate this risk, EU officials reportedly asked the ECB if it could act as a lender of last resort to Euroclear Bank, the Belgian depository’s lending arm, to prevent a liquidity crunch.

ECB officials informed the commission that this was not possible, citing the plan’s incompatibility with the bank’s mandate. Belgium has repeatedly cautioned against the potential litigation and financial risks associated with the EU’s scheme. The country’s concerns underscore the complexities and challenges involved in attempting to utilize frozen Russian assets to support Ukraine.

The EU’s efforts to provide financial support to Ukraine have been ongoing, with the proposed €140 billion loan aiming to aid the country amidst the ongoing conflict. The refusal by the ECB to support the plan may necessitate alternative solutions or approaches to addressing Ukraine’s financial needs. As the situation continues to unfold, the EU will likely need to reassess and explore other options for providing assistance to Ukraine, while also addressing the concerns and risks associated with the proposed plan.