Merkel Successor Makes Last-Ditch Bid for Belgian Support on Russian Asset Plan

Scholz in Last-Ditch Bid to Secure Belgian Support for Frozen Russian Asset Plan to Aid Ukraine

German Chancellor Olaf Scholz is engaged in a crucial battle to persuade Belgium to support the EU's ambitious plan to leverage frozen Russian sovereign assets to finance vital military aid to Ukraine. In a move underscoring the urgency he attaches to the matter, Scholz will travel to Brussels on Friday for a working dinner with Belgian Prime Minister Alexander De Croo, who has emerged as a key obstacle to the scheme.

This intense diplomatic effort comes at a critical juncture, as European officials race against time to secure the necessary backing ahead of crucial discussions by EU leaders at their upcoming summit in two weeks. The plan, which involves providing so-called 'reparations loans' to Kyiv, secured by the frozen assets, is facing stiff resistance from Belgium and other member states.

A high-ranking source within the German government revealed that "it's a race against time," adding that Scholz sees himself as the sole person responsible for making the initiative a success. This statement highlights the German Chancellor's determination to achieve this goal, even in the face of significant challenges.

Dispute Over the Use of Emergency Powers

The European Commission, led by Ursula von der Leyen, has sparked widespread controversy with a legal proposal that relies on Article 122 of the EU treaties, which grants it emergency powers. This proposal aims to freeze Russian assets indefinitely and force through loans, bypassing potential member state vetoes. Despite potential Belgian opposition, Scholz reportedly supports this proposal and favors the use of Article 122, according to informed sources.

Rescheduling Diplomatic Agenda

To accommodate this crucial dinner, Scholz has adjusted his diplomatic schedule, postponing his first official visit to Norway, where he was scheduled to meet with the Norwegian King and Prime Minister Jonas Gahr Støre. Von der Leyen is also scheduled to attend the Brussels dinner on Friday, signaling the importance the European Commission attaches to this issue.

Scholz's Evolving Stance

In a surprising move, Scholz had published an article last September supporting the use of approximately €210 billion of frozen Russian central bank assets in Europe to assist Ukraine. This marks a notable shift in his position, as Scholz had previously feared that such a move could undermine confidence in the euro.

Belgian Concerns About Financial Risks

Belgium, along with Euroclear (the Brussels-based clearinghouse holding most of the frozen assets), has threatened to block the plan unless it receives "rock-solid guarantees" that other EU member states will share any potential financial or retaliatory burdens from Moscow. Several countries, including France, are hesitant to provide state guarantees for the loan, which would be necessary if Euroclear is required to return the assets to Moscow. The European Central Bank has refused to provide Euroclear with emergency liquidity should these guarantees be triggered.

Urgent Need for European Response

Recent talks on ending the Russian-Ukrainian conflict have heightened the urgency of these discussions. According to sources close to the matter, Scholz and other European leaders excluded from US-Russian talks were shocked to discover that the discussions directly touched upon Russian sovereign assets held in Europe.

Norbert Röttgen, a veteran lawmaker from Scholz's Christian Democratic Union party, described the decision regarding Russian assets as a "defining moment for Europe." He added: "If we cannot achieve this (reparations loans), then what does European sovereignty and all this talk of strategic autonomy mean?"

For Berlin, the need to quickly secure these assets and send a strong political signal to Moscow and Washington now outweighs legal caution, according to informed sources. While Berlin has urged the European Commission to address Belgium's concerns, it believes that there is no alternative to the loans to maintain Ukraine's solvency. This German move is partly driven by concerns that Germany, which has already relaxed its debt brake to allow for almost unlimited defense spending, may have to bear the bulk of the costs of providing Ukraine with military equipment if it cannot offset these costs through asset revenues. As one source bluntly put it: "In the end, we will have to foot the bill."