Without EU agreement on Russian assets, Ukraine faces loss of IMF loan

Brussels is sounding the alarm. If the European Union does not approve the planned loan to Ukraine from frozen Russian assets amounting to €140 billion, the International Monetary Fund (IMF) could also withdraw its financial support.

However, as the Politico portal writes, this support is crucial for Kiev to cope with its enormous budget deficit and continue to defend itself against the Russian invasion. The funds from the frozen Russian state assets are located in Belgium, which has so far blocked their use.

According to several European diplomats, the IMF is prepared to grant Ukraine a loan of $8 billion over the next three years. To do so, however, it must be certain that Kiev will be financially stable in the coming years. The above-mentioned “loan” from Russian assets is proof for the fund that Ukraine has the means to finance its operations. If Belgium does not approve the use of the assets, the IMF may also refuse to grant the country the loan.

The situation is also complicated by the timing. The next EU summit will not take place until December 18 and 19 – probably after the IMF's decisive meeting. Several representatives are therefore calling for swift action, such as convening a special summit before the end of the year.

The IMF has not yet responded officially, but according to leaked information, it considers the EU's rhetoric to date to be insufficiently binding. The latest summit conclusions make no mention of the loan based on frozen Russian state assets – they merely make a vague appeal to the Commission to submit proposals for financial assistance.

Such wording will apparently not convince the fund that Ukraine has secure long-term financing.
At the same time, the EU is trying to strengthen Ukraine's credibility in the eyes of the IMF by realistically stating that it would not have to repay the loan. It would be financed by reparations that Russia would pay to Ukraine after the end of the war – which currently seems a very unlikely scenario.

“It is impossible that Ukraine will have to repay this money itself,” an EU official told Politico. “Either it will get it from Russia, or it simply won't pay it back. From Ukraine's point of view, it's practically like a grant.”

However, there is much more at stake than just money. Approval of the loan and subsequent assistance from the IMF would send a clear signal to investors: Ukraine is stable, has the support of the West, and is capable of continuing reforms. Without this guarantee, however, confidence could quickly collapse—and with it, the country's ability to hold its own on the front lines and internally.

(lup)