EU plan on freeing Russian assets for Ukraine, Belgium first wants liability guarantees | DW News

Key Concepts

• Frozen Russian Assets: Funds belonging to the Russian state or entities that have been immobilized by international sanctions.
• Sovereign Assets: Assets owned by a state, which are generally protected from confiscation under international law.
• EU Sanctions Package: A set of restrictive measures imposed by the European Union on Russia.
• Euroclear: A financial institution based in Belgium that holds a significant amount of frozen Russian assets.
• Liability Sharing: The concept of distributing the financial and legal risks associated with a particular action among multiple parties.
• Shadow Fleet: A fleet of oil tankers that operate outside of international regulations, often used to circumvent sanctions.
• Secondary Sanctions: Sanctions imposed on entities or countries that engage in transactions with sanctioned individuals or entities.
• Hard Currency Earnings: Foreign currency that is widely accepted internationally, such as US dollars or Euros, which Russia relies on for its economy and war efforts.

EU Decision on Frozen Russian Assets Postponed

EU leaders have delayed a decision on utilizing billions of euros from frozen Russian assets to aid Ukraine. The proposed plan involves a €140 billion loan to Ukraine, with Russia's funds technically not being confiscated outright due to international law prohibiting the seizure of sovereign assets.

Belgium's Concerns and Liability: The majority of these frozen assets are held in Belgium. Belgium has requested guarantees that it will not be held liable if Russia initiates legal action to reclaim the funds. The Belgian government is seeking to share the risk of potential Russian retaliation, both legal and financial, with other EU member states. The Belgian Prime Minister has reportedly presented other EU leaders with a proposal for them to sign and share this liability.

European Commission's Role: The European Commission has been tasked with developing a detailed plan on how the frozen assets would be utilized. Belgium has stated it will not comment further until this plan is presented.

Rationale for Using Assets: The EU's strategy is not to confiscate the money directly but to use it as collateral for a loan. The ultimate aim is to compel Russia to pay reparations for the damage caused to Ukraine and potentially fund Ukraine's defense needs. This approach is seen as a clever way to make Russia finance its own war's consequences.

Location of Assets in Belgium: The significant concentration of Russian assets in Belgium is attributed to Euroclear, a holding facility with a high level of international trust. While other countries also hold Russian assets, Belgium holds the largest portion. Belgium has reportedly offered other countries the option to host this facility now that it has become controversial.

Solidarity Among Member States: The success of this plan hinges on the solidarity of EU member states in backing Belgium and sharing the potential risks. The outcome remains uncertain, with ongoing negotiations expected.

EU Sanctions on Russian Gas

The EU has agreed to phase out the import of Russian gas. This marks the EU's 19th sanctions package against Russia and is the first to specifically target Russian gas imports. Despite significantly reducing oil purchases since the invasion of Ukraine, the EU continued to buy record amounts of Russian gas last year, which contributed to Moscow's war funding.

US Sanctions and Diplomatic Developments

US Sanctions on Russian Oil Companies: The EU's actions followed the US announcement of new sanctions targeting two of Russia's largest oil companies, Rosneft and Lukoil. These sanctions are intended to pressure the Kremlin into negotiating a ceasefire in Ukraine.

Trump's Stance and Meeting with Putin: US President Donald Trump announced and later called off a planned meeting with Russian President Vladimir Putin. Trump also denied Ukraine's request for Tomahawk missiles.

Russia's Reaction to Sanctions: Russia has stated that the US sanctions plan will fail and has accused Europe of clinging to "ineffective measures." Putin has described the fresh sanctions as an "unfriendly act" that could backfire but has downplayed their significant impact on the Russian economy, acknowledging they will have "certain consequences."

Expert Analysis on Sanctions Effectiveness

Angela Stant's Perspective: Angela Stant, a senior fellow at the American Enterprise Institute, suggests that while Russia attempts to portray the sanctions as having minimal impact, they could indeed cause economic pain. The Russian stock market has shown a decline, and in the long run, reduced hard currency earnings could hinder Russia's ability to fund its war.

Evasion of Sanctions: A key factor in the effectiveness of sanctions is Russia's ability to evade them. Stant notes that Russia has been successful in evading oil sanctions through a "shadow fleet" of tankers. The enforcement of secondary sanctions on countries purchasing Russian oil is also crucial and remains an unknown.

Potential for Further US Pressure: If current sanctions prove ineffective, further economic pressure could include additional financial sanctions and, most importantly, depriving Russia of hard currency earnings.

US-Russia Summit Stalemate: The prospect of a second US-Russia summit appears to be off the table, contributing to a stalemate in efforts to end the war in Ukraine. While Trump has now imposed sanctions, a move that was long-awaited, he has not agreed to provide Ukraine with long-range missiles. However, other forms of US assistance and greater permission for Ukraine to use American weapons to strike deeper into Russia are potential avenues for military pressure. Stant believes Trump may have realized Putin has been manipulating him.

Other International Incidents

Lithuanian Airspace Violation: Lithuania reported that Russian warplanes violated its airspace, originating from Russia's Kaliningrad region. Vilnius summoned representatives from the Russian embassy, and Spanish Eurofighter Typhoon jets were scrambled in response.