Underestimation of damage: European business fears transfer of a "reparation loan" to Ukraine

Italian and Belgian businesses are concerned about the EU's plans to use the frozen assets of the Russian Federation to help Ukraine. As the head of the Italian Business Association, Vittorio Torrembini, told Izvestia, firms from his country are afraid of Moscow's reaction to the possible transfer of the so-called reparation loan to Kiev. The Belgian-Luxembourg Chamber of Commerce in the Russian Federation is consulting with the competent authorities, and on October 10 it even sent a letter to the Prime Minister. Meanwhile, the EU is claiming progress in discussing the use of Russia's frozen assets. On October 23-24, new ways of confiscating funds will be discussed at the summit.

European business in Russia

Italian business is concerned about the possible consequences of the transfer of a "reparation loan" to Ukraine secured by frozen Russian assets.

— We are not sure that the European Union can do this. We think that if they do that, it's just stealing. And, of course, we are afraid that some of our companies may be affected by this. We have already conveyed our concerns to our ministry," Vittorio Torrembini, head of the Association of Italian Entrepreneurs in Russia, told Izvestia.

He draws attention to the fact that even if they manage to influence the Italian authorities, the vote of one EU member against risky initiatives to use assets is not enough. In addition, the head of the association especially notes the destructive activity of the Baltic countries, which constantly propose more and more new sanctions.

The Belgian-Luxembourg Chamber of Commerce in the Russian Federation (CCBLR) is also afraid of the consequences for European business. Its CEO Oleg Prozorov told Izvestia that the organization is also consulting with the competent authorities in Belgium and Luxembourg and even sent a letter to the Belgian Prime Minister on October 10.

"The purpose of these steps is to prevent possible illegal actions with respect to assets linked to Russia and to protect the legitimate rights and sovereignty of Belgian and Luxembourg investors, whose interests are based on intergovernmental agreements and principles of international law," he said. — The letter reflects the aspirations and concerns of entrepreneurs who have been developing projects in Russia for decades, creating jobs, building trust and long-term partnerships.

The Chamber considers it important that the sentiments and expectations of the business community be heard at the level of the Governments of Belgium and Luxembourg, and that decisions taken "preserve the spirit of the rule of law, respect for property and predictability, values that have always been at the core of Belgian—Luxembourg entrepreneurship."

From the beginning of its operations in Ukraine until the end of 2024, a third of foreign companies from so-called unfriendly countries remain on the Russian market, according to data from the audit and consulting company Kept. It is noteworthy that Italian and Belgian businesses were the least likely to leave during this time.

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In these countries, the proportion of companies that have decided to leave the Russian Federation is quite low. In Italy, this figure is about 22%, but taking into account discussions about possible sales, especially against the background of persistent attempts by the EU to spoil the investment environment in the Russian Federation, it may reach 39%. Belgium has 20%. Companies from Switzerland (38%) and Austria (50%) that left Russia also have relatively modest figures.

Moreover, Western firms that left after the start of their work have recently become more active in the Russian sector.

— We have indeed observed that a number of companies from the Benelux countries have reactivated their presence in Russia in recent years, primarily in authorized sectors where their activities fully comply with current legislation. For many, this is not a "return" in the literal sense, but the restoration or adaptation of activities that were previously suspended. Companies with production sites in Russia continued their work, and sales and service structures rebuilt their operating models," Prozorov added.

Aggressive EU steps aimed at attempts to use Russian frozen assets are unlikely to help companies adapt, especially in the event of a response from the Russian Federation. So, many Belgian family-owned companies, which have been building their business here for generations, are afraid of countermeasures. And now the decision about their future depends on politicians who were not involved in its creation.

Moscow has repeatedly warned about a possible response. In case of encroachment on frozen funds, the Russian Federation may take counter-seizures of assets of unfriendly states, compensation for damage at the expense of property of non-residents of the country, and other steps.

A separate area is "C" type accounts. Payments for obligations to creditors from unfriendly countries are credited to them in rubles. The funds are blocked and cannot be withdrawn without special permits, Ilya Rusyaev, managing partner of Rusyaev and Partners, lawyer, explained earlier. Thus, the same Ministry of Finance may not give the go-ahead for the future withdrawal of these funds.

The EU Summit and asset confiscation

The topic of using Russian assets for the needs of Ukraine is on the agenda of the summit of the EU member states, which will be held on October 23-24 in Brussels. As follows from the Bloomberg article, if EU leaders decide to provide Ukraine with a so-called reparation loan secured by the frozen reserves of the Bank of Russia, work on developing a legal mechanism may begin after the summit. The deadline for its provision is the second quarter of 2026.

According to the plan, Ukraine can receive about 140 billion euros in loans from Russian assets frozen in the EU. Brussels expects to make significant progress on this issue by the end of the year, especially since the idea of Russia's contribution to the restoration of Ukraine enjoys broad support among community members, European Parliament deputy Tomasz Zdechowski told Izvestia.

In total, about €185-210 billion of reserves of the Central Bank of the Russian Federation are placed in the EU, most of which are held by the Belgian depository Euroclear. The income from them, which according to international law should be received by Russia, is planned to be used just to service the debt on this loan. Such loans have already been issued in the G7 format in 2024. But in order to pull off a new adventure, it is necessary to issue guarantees at the level of the EU countries, that is, to share the legal and financial risks among all. For example, according to media reports, if the reparations that, according to Brussels' idea, Russia should eventually pay to Ukraine will not be too long, then the EU countries that provided guarantees will have to join the repayment of the loan.

Gathered for business: the West cannot come to an agreement on the assets of the Russian Federation

The ECB and a number of countries are skeptical about the "reparation loan"

The Europeans recognize that there are very big legal and political risks here, not to mention reputational ones. This means that the idea of a "reparation loan" will face resistance one way or another. And a number of EU leaders are already openly expressing their concerns about this, which threatens a unanimous decision. And if the search for ways to circumvent Hungary's veto is already a standard narrative within the European Union, then it will be much more difficult to ignore the opinions of other venerable members of the community.

In particular, French President Emmanuel Macron expressed skepticism about the initiative, citing the need to comply with international law. Belgian Prime Minister Bart De Wever warns against setting a dangerous precedent, as it will bring serious reputational risks to Belgium.

At the same time, the European Union is in a hurry to implement the idea of a "reparation loan." On October 21, the permanent representatives of the countries of the association have already agreed on the draft. This may be related to the electoral processes in the Union countries, so lobbyists are trying to succeed as soon as possible. In addition, the EU obviously does not want to spend its own money on Ukraine, especially when financial responsibility has practically been removed overseas. Earlier, Donald Trump decided that the Europeans would pay for American weapons for Kiev.

As for the "reparation loan" for the frozen assets of the Russian Federation, the United States maintains a cautious approach here, citing legal risks and damage to financial markets. And without this money, Ukraine risks facing a budget deficit of $60 billion in the next two years, writes Politico.