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European Union Explores New Mechanisms to Utilize Frozen Russian Assets for Ukraine Support

The European Union is evaluating several strategies to utilize frozen Russian assets to support Ukraine's defense and recovery. A primary focus involves a "reparations loan" proposal, where the EU would borrow interest-free from the banks holding Russian assets, such as Euroclear in Belgium, and lend that cash to Ukraine. This method allows the banks to retain ownership of Russia's deposits, while the EU guarantees the safety of the funds if sanctions are lifted. Belgium has expressed concerns regarding legal risks, specifically demanding an uncapped guarantee from the EU to protect against potential Russian lawsuits. To address these concerns, experts are also discussing moving the assets from Euroclear to a new EU-level custodian. This would shift legal responsibility from Belgium to the entire European Union, potentially simplifying the decision-making process. Additionally, the European Union's General Court dismissed a lawsuit from the previous Hungarian government, which argued that Hungary should have had a right to vote on the European Peace Facility's use of frozen Russian assets. The Court ruled that the decision was a strategic choice under the Common Foreign and Security Policy, which is largely shielded from judicial review.

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