Political Reporter.

stephenkmacksd.com/

Oct 20, 2025

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Error on: paragraph 6:

There is no good financial reason beyond accounting. There may be some interest saved by forcing custodians to lend cash at the same zero rate they pay Russia on its deposits — but that saving was already going to be captured over time through special levies agreed last year.

Error on paragraph 10:

There is no good financial reason beyond accounting. There may be some interest saved by forcing custodians to lend cash at the same zero rate they pay Russia on its deposits — but that saving was already going to be captured over time through special levies agreed last year.

Editor: Reader Martin Sandbu caveats are voluminous!

Around €140bn would be lent to Kyiv and only repaid out of any reparations from Moscow. Without them, the EU as the lender would not get its money back. The EU would itself fund the loan by requiring Euroclear, the Belgian securities depository where most of Russia’s hard-currency reserves are blocked, to lend it cash built up as sanctioned Russian investments have matured. In return, Brussels would post what amounts to an IOU, backed by member states and later the next EU budget.

The plan suffers from contradictions. The proposal does not actually touch Russia’s assets, in spite of efforts to depict it as making Moscow pay. In fact, it explicitly rules out changing Russia’s legal claims. It is only an EU private financial institution (Euroclear) that will be strong-armed here — although other G7 countries are looking for ways to join in, and Brussels is hinting that more European banks with some Russian assets could be added.

But any new burden will fall only on European taxpayers. If Russia never pays reparations, the EU forgives Ukraine’s loan but still has to shoulder its own obligation incurred to fund it. There will never be an EU default on Euroclear; Belgium’s reported worries are exaggerated.

So why is the EU going through financial acrobatics to pretend Russian assets are being used, when it could just issue bonds and lend money, as it already does for many purposes, including support for Ukraine? There is no good financial reason beyond accounting.

There may be some interest saved by forcing custodians to lend cash at the same zero rate they pay Russia on its deposits — but that saving was already going to be captured over time through special levies agreed last year.

Editor: A selection from the remaines of Sandbu’s poltical speculations. In this regard, Readers of another Age of the Newspaper, might look to the birdcage, as the final repository, of political speculations, of the kind Sandbu presents to his readership?

There is, however, a political answer — and a dispiriting one. EU leaders, above all Merz, want large-scale funding to show Russia that Europe stands behind Ukraine for the long haul. But the contortions show Putin that Europeans are finding it ever harder to pay up, which sends the opposite signal.

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Another contradiction is that the EU wants a say in how the money is used. Merz says it should only be used on weapons. This may be a good idea.

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Still, I support the proposal. Getting large sums to Kyiv, without which Ukraine will be butchered and Europe left defeated and insecure, matters more than anything. If custodians beyond Euroclear — in the EU or other G7 countries — are brought into the mix, that is progress, as larger sums will be revealed for potential future seizure. It is essential, however, that this plan does not close off paths to that.

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This could be bought by a coalition of willing governments and reincorporated in a less timid jurisdiction than Belgium. Then reparation loans could be made without involving EU taxpayers.

If the current plan is passed, however, it may produce a subtle change in the politics of the frozen assets. European public finances will depend directly on whether Russia pays reparations and the bloc lifts sanctions.

That may steel some spines in countries, including Germany, where influential voices privately dismiss any insistence on reparations in a final settlement with Russia. And that, in turn, will make it harder for others — in particular Putin and Donald Trump together — to take European acquiescence for granted. By raising the direct financial cost of its usual timidity in the future, Europe may just be buying itself a seat at the table.

Political Reporter.