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Hungary’s Viktor Orbán will lump European taxpayers with an even bigger bill for support to Ukraine if he forces the EU to lift restrictions on €210bn of frozen Russian assets, Estonia’s foreign minister has warned.
Margus Tsahkna told the Financial Times that blocking the renewal of EU sanctions — a threat Orbán has repeatedly made but never acted on previously — would leave G7 and EU governments on the hook for multibillion-euro loans made to Kyiv that were backed by Russian assets.
The EU and G7 — which includes the US, Canada, Japan, France, Italy, Germany and the UK — last year used profits arising from about €260bn of frozen assets worldwide to underpin a €50bn loan to Ukraine. If the assets are unfrozen, the EU and the US would each be liable for €20bn of the loan, while the rest would fall on other G7 members.
“The problem [is] that these assets which are guaranteeing this loan will be gone,” Tsahkna said, referring to scenario where EU sanctions lapse.
Officials expect Orbán to adopt an even more truculent approach in the upcoming discussion to rollover sanctions, which expire at end of July. Sanctions need to be agreed unanimously by EU member states. The vast majority of the frozen assets are held at Euroclear, a financial intermediary based in Belgium.
“If they are going to block it, then the sanctions will be down. And the central bank assets will be delivered to Russia, to [Vladimir] Putin, as an award,” Tsahkna told the Financial Times. “We cannot let it happen.”
The European Commission has been trying to develop a fallback plan should the sanctions rollover fail, but EU officials have said that most legal avenues are fraught.
“We need some kind of legal frame or some kind of procedure,” Tsahkna said, saying it would need to involve a “coalition of the willing” that goes beyond the EU to include G7 members and countries such as Norway.
Estonia advocates G7 countries seizing the Russian assets rather than leaving them subject to sanctions. “It would be the most clear and most understandable solution,” Tsahkna said.
Some countries in the EU and the G7 have resisted such a move, arguing it may violate international law and undermine faith in the euro. Belgium, where some €190bn of the assets are held at the central securities depository Euroclear, strongly opposes such a move, fearing it would be the prime target of legal challenges.
“Our position has not changed,” Belgian budget minister Vincent Van Peteghem told the FT. “Confiscation is not an option for the moment due to all the risks that are related to it. And at the same time, it is better to keep these frozen assets as a lever during the peace negotiations with Russia.”
Tsahkna said he was sensitive to the Belgian reluctance to seize the assets. “We definitely understand that they cannot be left alone in that very complicated situation,” he said, adding that such a decision would need to be collectively taken by a group of states, ideally including the entire G7.
Negotiations with Hungary should also continue, Tsahkna said, pointing out that Orbán is dependent on EU funds. “I know that they have many problems with their economy,” he said.
Russia has been trying to find ways to get to the assets despite them being frozen. Ukrainian officials have warned that they are trying to selling portions to investors, who would recover them once they are unfrozen at a future date.
Tsahkna dismissed those schemes as unrealistic. “Of course Russia would like to use their frozen assets to bargain and make deals. But the fact is that they don’t have these assets, they are frozen in Europe.”
Tsahkna said that ultimately, what happens with the sanctions rollover and the frozen assets depends on peace negotiations brokered by the US. “Even President Trump has said in theory that he gives the time up to the end of April and then he will act.”
Additional reporting by Paola Tamma in Brussels
