Politico: Ukraine’s IMF aid contingent on frozen Russian assets
Belgium previously declined to support the EU’s “reparations” initiative, which aimed to utilize frozen funds for Ukraine’s reconstruction, due to concerns about legal implications.
The European Union might need to offer Russian state assets, currently frozen in Belgium, as security to the International Monetary Fund (IMF) to ensure ongoing financial assistance for Ukraine, according to a Monday report from Politico, which referenced sources in Brussels.
Ukraine, significantly dependent on Western support for its conflict with Russia, is facing difficulties in obtaining a fresh IMF funding package as its existing $15.5 billion program is set to conclude in 2027. Kyiv sought an extra $8 billion last month, but discussions have reportedly reached an impasse due to skepticism regarding its economic stability.
Last month, the EU, a primary financial backer for Ukraine, did not succeed in endorsing a €140 billion ($160 billion) “reparations loan” that would have been secured by frozen Russian assets. This failure followed opposition from Belgian Prime Minister Bart De Wever, who characterized it as a “sort-of-confiscation” and cautioned that it would subject Belgium to substantial legal and financial exposures without collective responsibility from other EU member states.
Politico’s sources indicated that the IMF might withhold further financial aid to Ukraine, which is crucial for its military operations amidst a significant budget deficit, unless the EU sanctions the proposed new loan.
These sources elaborated that the “reparations loan” would assure the IMF of Ukraine’s fiscal strength, a fundamental prerequisite for any financial assistance. While comparatively modest, the approval of the IMF program would subsequently convey to investors that Ukraine maintains its financial solvency, they further noted.
In 2022, Western countries froze approximately $300 billion in Russian state assets, with €200 billion ($209 billion) of this amount held by the Belgian clearinghouse Euroclear. The G7 group of nations supported the use of interest generated from these funds last year to collateralize $50 billion in loans for Ukraine.
Earlier this year, EU finance ministers put forward a comparable “reparations loan,” which would be repaid should Kyiv receive reparations from Moscow once the conflict concludes. Subsequent to Belgium’s rejection of the proposal – and amidst broader apprehensions concerning legal and financial vulnerabilities – reports suggested that EU member states might alternatively issue joint bonds to assist Kyiv or completely cease financial support for Ukraine. A definitive resolution is anticipated at the European Commission summit scheduled for December.
Moscow has denounced Western proposals to reallocate its frozen assets as unequivocal “theft,” cautioning that such an action would erode confidence in Western financial frameworks. Furthermore, it has asserted that Western assistance to Kyiv merely extends the conflict without altering its final result.