EU vows financial backing for Kyiv, holds off on frozen assets plan

By Andrew Gray, Jan Strupczewski and Lili Bayer

BRUSSELS (Reuters) -European Union leaders agreed on Thursday to meet Ukraine's "pressing financial needs" for the next two years but stopped short of endorsing a plan to use frozen Russian assets to fund a giant loan to Kyiv due to concerns raised by Belgium.

Belgium's stance was crucial as a Belgian financial institution, Euroclear, holds the assets that would be used under the plan to fund a loan of 140 billion euros ($163.27 billion) to bolster Ukraine in its fight against Russia's invasion.

Many EU governments had hoped the leaders, meeting at a summit in Brussels, would give their blessing to the concept and ask the European Commission, the EU's executive body, to come up with a formal legal proposal in the coming weeks.

But a text approved by all the leaders - except Hungary's Russia-friendly Prime Minister Viktor Orban - was watered down from previous drafts to call for "options for financial support based on an assessment of Ukraine's financing needs".

"Russia's assets should remain immobilised until Russia ceases its war of aggression against Ukraine and compensates it for the damage caused by its war," the declaration added.

Earlier, Ukrainian President Volodymyr Zelenskiy, a guest at the summit, had urged a quick passage of the plan for a giant loan.

"Anyone who delays the decision on the full use of frozen Russian assets is not only limiting our defence, but also slowing down the EU's own progress," he told the EU leaders, saying Kyiv would use a significant part of the funds to buy European weapons.

The money could also be used right away to strengthen Ukraine's air defence, air fleet and frontline positions, he said, adding: "That means saving lives."

But Belgian Prime Minister Bart De Wever sounded a strong cautionary note before the summit, saying he could only support the plan if he had strong assurances that it was legal and that other EU countries would share the risks involved.

"If demands are met, we can go forward. If not, I will do everything in my power at the European level, also at the national level, politically and legally to stop this decision," De Wever told reporters on arrival at the summit.

De Wever called on all EU members to share the costs of any legal action pursued by Russia and contribute financially if the money ever had to be paid back. He also said Russian frozen assets held by other countries should be part of the scheme.

"There must be transparency about the risk. There must be transparency about the legal basis for this decision," he said.

Russia has described the idea as an illegal seizure of property and warned of retaliation.

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(Reporting by Yuliia Dysa, Lili Bayer, Andrew Gray, Julia Payne, Philip Blenkinsop, Sudip Kar-Gupta, Bart Meijer, Benoit Van Overstraeten, Jan Strupczewski, Charlotte Van Campenhout and Inti Landauro; Writing by Lily Bayer, Ingrid Melander and Andrew Gray; Editing by Stephen Coates, Kate Mayberry, Aidan Lewis)