The European Union has unveiled plans to use billions of euros in frozen Russian assets to help cover Ukraine's war needs over the next two years.
But Belgium is objecting after the announcement on Wednesday, arguing that the plan carries legal and financial risks that it fears it could end up taking on itself.
European Commission President Ursula von der Leyen said Brussels would supply 90 billion euros ($105 billion) of Ukraine's budget requirements for 2026-27, estimated by the International Monetary Fund at 137 billion euros ($159 billion).
She said "other international partners" would cover the rest.
"Today, we are sending a very strong message to the Ukrainian people. We are with them for a long time," von der Leyen said.
Frozen Russian funds held in Europe will be used as collateral for a “reparations loan” designed to support Ukraine’s war effort, and which Ukraine will eventually repay after receiving compensation for the war from Russia.
The aid could also be financed through joint EU borrowing, but, despite Belgian objections, most European officials have expressed a preference for using frozen Russian assets.
The EU plan comes as the latest round of US-led peace talks between Russia and Ukraine show little sign of progress.
Moscow has denounced the reparations loan plan as "theft."
How is the EU proposing to finance Ukraine?
Since Russia's full invasion of Ukraine in February 2022, the European bloc has made more than 170 billion euros ($197 billion) available to Ukraine, mainly in the form of military and humanitarian support.
The European Commission is now pledging to provide more money for another two years in the form of loans.
And on Wednesday, the long-awaited details of the EU's plan for a "reparation loan" were released.
According to him, about 90 billion euros ($104 billion) of frozen Russian assets will be used as collateral for a loan to Ukraine.
Under a loan agreement, repayment of creditors - both the government and private lenders - will be guaranteed by current and future profits from the frozen assets.
Ukraine will repay the loan after Moscow compensates Kiev for the destruction caused by its invasion.
"It's a pretty smart tactic," he told Al Jazeera, Gregoire Roos, director of the Europe and Russia and Eurasia Programmes at Chatham House.
"They are not seizing the assets. Instead, they are keeping them frozen and monetizing them."
Von der Leyen believes the funds will give Ukraine more leverage in peace talks and show Moscow that "prolonging the war on their part comes at a high cost to them." She added that Washington had been informed of the plan.
Why does Belgium oppose this plan?
Belgium is concerned that Euroclear - the Brussels-based "financial clearing house" that holds the bulk of frozen Russian assets - could end up embroiled in a damaging lawsuit if Russia challenges the EU decision, or if the action damages Euroclear's reputation and business model.
In theory, Russia could challenge the asset freeze decision in a court in Belgium, where Euroclear is based.
Addressing an audience at NATO headquarters in Brussels on Wednesday, Belgian Foreign Minister Maxime Prevot said: "We are not seeking to antagonize our partners or Ukraine. We are simply seeking to avoid potentially catastrophic consequences for a member state that is being asked to show solidarity without offering the same solidarity in return."
Prevot said Belgium sees "the reparations loan option as the worst of all, as it is dangerous" and "has never been done before."
Instead, he wants the EU to pursue normal market borrowing to finance a loan to Ukraine.
"It's a well-known, powerful and well-established option with predictable parameters," he said.
To respond to Belgium's concerns, the European Commission's plan includes measures to protect EU governments from "possible retaliation by Russia" and to create an EU-level borrowing mechanism.
How much money is “at stake”?
Some 290 billion euros ($337 billion) of Russia's sovereign wealth - mostly in the form of foreign exchange reserves held as cash and bonds - was frozen by Western powers after Moscow's invasion of Ukraine nearly four years ago.
A large portion of these assets is held in Belgium, where approximately 194 billion euros ($225 billion) were held as of June this year.
Euroclear alone holds about 183 billion euros ($212 billion) of these assets.
Smaller amounts of assets are also held in the US, the UK and Japan.
Under a plan agreed by the Group of Seven (G7) countries in 2024, Ukraine would be given loans that would be repaid using interest earned on Russia's frozen foreign assets, effectively leaving the assets untouched but allowing Kiev to benefit from the income they generate.
But a recent announcement goes a step further by collateralizing the frozen funds.
What do Belgium's EU partners say?
On Wednesday, von der Leyen said she was considering Belgium's objections.
"We have listened very carefully to Belgium's concerns and have taken almost all of them into account in our proposal. We will share the burden in a fair way, as it is the European way," she said.
Other European officials echoed this.
Johann Wadephul, Germany's foreign minister, said: "We take Belgium's concerns seriously. They are justified, but the issue can be resolved. It can be resolved if we are prepared to take responsibility together."
Elsewhere, David van Weel, the Dutch foreign minister, highlighted the dangers of Belgium's "stubbornness."
"These funds are really, really important. We need to support the Ukrainian economy; otherwise, they will have a very difficult time next year."
Van Weel stressed that EU member states have listened to Belgium.
"We understand Belgium's concerns and we are willing to at least make sure they are not alone in this," he said.
Other EU countries have already signaled their willingness to support possible losses for Belgium. /Telegrafi/
