End of Easy Money

These days, Brussels’ corridors resemble an emergency crisis headquarters. The EU summit, stretching well past midnight, turned into a battleground between basic arithmetic and political hysteria. At stake was the fate of frozen Russian assets and, by extension, the question of war and peace on the continent.

Let us fix a few basic facts. Europe has simply run out of money to sustain the Ukrainian project. Budget injections into the European defense industry have reached their limit, American assistance is now purchased rather than gifted, and the summit itself concluded with a thoughtfully articulated nothing. All of this unfolds against the backdrop of large-scale protests by European farmers, whose products are rapidly becoming unsellable at current production costs.

The idea of fighting Russia with Russian money has a certain intoxicating appeal for Ursula von der Leyen and her circle. Ideologically, it fits perfectly into the EU’s current worldview. Russia unwisely stored a large portion of its reserves in Europe, so why not turn Moscow’s money against itself, channeling it into Ukraine and, more importantly, into the European military-industrial complex. A beautiful idea. One problem. It failed its first encounter with reality.

Executives of major European banks and industrial groups grasped the consequences immediately. Confiscating Russian assets would trigger instant losses exceeding 127 billion dollars. The volume of Western assets subject to Russian countermeasures would cut the expected benefit of this painful decision at least in half.

Austria’s Raiffeisen, Italy’s UniCredit, and more than two thousand Western companies still operating in Russia would become hostages to Brussels’ adventure. Belgium’s Euroclear, holding client assets worth roughly 17 billion euros, would be the first casualty. An advanced autoimmune condition has pitted Brussels as Belgium’s capital against Brussels as the EU’s capital.

Ironically, at this stage, European recklessness could even benefit Moscow. Russia faces a budget deficit, oil prices pressure revenues, and high interest rates are weighing on the economy. The Finance Ministry is forced to seek funding through domestic borrowing.

Meanwhile, hundreds of billions of rubles have accumulated in so-called type C accounts, special accounts holding blocked dividends, interest, and proceeds from asset sales. BP’s dividends from its stake in Rosneft alone amount to roughly 340 billion rubles. JPMorgan holds over 240 billion rubles in such accounts. Formal confiscation of Russian assets by Europe would provide a near-perfect legal justification for redirecting these funds directly into the Russian budget.

At the same time, the coalition of European states unwilling to participate in the reparations loan scheme is expanding rapidly. Belgium, Austria, and Italy openly reject involvement in what they consider legalized expropriation. Belgian Prime Minister Bart De Wever has stated plainly that no compromise exists that would make his country complicit in unlawful actions. Even if the European Commission attempts to push a decision through by qualified majority, bypassing unanimity, Belgium has issued a blunt warning. Funds held at Euroclear will not be released. The company is private, and jurisdiction rests with the Belgian state.

Hungarian Prime Minister Viktor Orbán declared the confiscation idea dead even before the summit ended. In his view, a blocking minority has already formed. The issue of the reparations loan has effectively been removed from the agenda.

The EU’s decision to permanently immobilize Russian assets, adopted on the eve of the summit, reflects less a breakthrough by the Commission than a desperate attempt to secure a seat at the negotiating table on a future peace settlement, even if only at its very edge. Frozen assets are now part of Trump’s peace initiative, which means that dialogue among Washington, Moscow, and Brussels is possible on this issue alone. One takes what one can.

The current negotiations over the reparations loan represent the last serious stand of those invested in prolonging the conflict. A battle they appear to be losing. If the EU fails to secure financing for Kiev immediately, if the discussion drifts into the holiday season, the Ukrainian leadership will effectively lose its ability to resist a peace settlement negotiated between Moscow and Washington.

Some figures in Kiev understand this even more clearly than officials in Brussels. On the eve of the summit, David Arakhamia, leader of the internal opposition to Zelenskiy within the Servant of the People faction, stated bluntly that with the Americans there will be a bad or very bad peace, and without them there will be continued war with grim consequences for Ukraine.

At this point, even the corridors of Brussels seem to understand what the summit officially could not say.