Brussels said its push to use immobilised Russian central bank assets held in Belgium entails a risk of “knock-on effects” if the loan is viewed internationally as a “confiscation”. It emphasised that these assets would be used to lend to Ukraine at zero interest, with repayment conditional on future reparations paid to Ukraine by Russia. EU countries would provide guarantees to cover potential legal or financial risks.

“As this option would be a financially and legally innovative solution, it cannot be discounted that there are potential knock-on effects, including for financial markets,” the Commission noted.

“A concerted effort by the Union, and possibly international partners, to counteract such perception would need to be made,” it added, noting that this “risk can also be further reduced if international partners take similar measures to the reparations loan”.

The concerns echo those long voiced by Belgium, which has warned that the assets’ improper use could spark a mass exodus of investor capital from Europe and harm the reputation of Euroclear, the Brussels-based clearing house holding the assets that would be used for the loan.

Belgian Prime Minister Bart De Wever has also refused to back the scheme unless associated financial and legal risks are shared among EU members, and other Western countries holding Russian assets use them to support Kyiv’s war effort.