The behind-the-scenes preparations for the meeting of European leaders in Copenhagen would have made a fitting episode of the Danish political drama Borgen, which follows the struggles of fictional prime minister Birgitte Nyborg.
Mysterious drones appeared and shut down the capital airport, then other airports, causing huge disruption. More drones were spotted near military sites in the week before Denmark was to host back-to-back high-level summits, something that is a major logistical undertaking in isolation.
Russia was blamed as the likely culprit, though investigating authorities have not publicly said they have been able to confirm whether the Kremlin or its allies were the source of the interference.
It was Christiansborg Palace, a location familiar to fans of the Borgen series, where the actual Danish prime minister Mette Frederiksen welcomed the other 26 EU leaders for a summit on Wednesday. Known as the “castle”, or borgen in Danish, Christiansborg houses the prime minister’s office, the parliament and supreme court.
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As often is the case when EU leaders gather these days, the war in Ukraine and Europe’s belated plans to up the amount it spends on its own defence dominated the agenda.
A new plan was tabled, controversial or clever depending on who you ask, that could see a whopping €140 billion loan extended to Ukraine. It would be funded by a huge pile of Russian money that Vladimir Putin can’t get his hands on, because it’s sitting in a clearing house account in Belgium.
Sweeping economic sanctions in the early weeks of Russia’s full-scale invasion of Ukraine froze Russian assets that were inside the EU at the time, worth hundreds of billions of euros. The assets, mostly Russian central bank bonds, have been kept on ice since then in Euroclear, a Brussels-based central securities depository.
The EU previously used the profits that mountain of assets was accumulating to finance a big part of a $50 billion (€43 billion) loan to Kyiv.
Now some leaders want to go further, effectively tapping the frozen assets themselves, which have mostly matured from bonds to cash.
US president Donald Trump has begun pulling back his country’s financial support for Kyiv, leaving what could become a huge financial hole. EU capitals are baulking at the thought of having to fill it from their own budgets.
Ukraine remains under an intense barrage from Russian drone and missile attacks. On the ground, its forces are tired. Kyiv will be increasingly looking to lean on its European allies. The prospect of any quick truce brokered by Trump has faded for now.
It is estimated Ukraine will need an extra €130 billion over 2026 and 2027. There will be a real financial pinch expected in the second half of next year.
The European Central Bank has been hostile to any talk of the EU permanently seizing the frozen Russian assets, as that would fall foul of international law.
The European Commission, the EU’s executive branch, circulated an internal paper to diplomats last week, sketching out a possible workaround. A convoluted loan structure would be set up to replace the frozen assets with an IOU. The paper said Russia would be repaid only when it had compensated Ukraine for the destruction Putin’s war had caused.
There are still a lot of open questions about the proposal. “This is a very complex issue with a lot of financial and legal implications,” one senior EU official said. No decision was expected to be taken at the Copenhagen summit.
The Belgian government has been fiercely opposed to calls to touch the assets. It is nervous it will be left on the hook in the event of any legal challenge, given it is the country holding the frozen Russian cash. They also feel the assets are an important bargaining chip in Europe’s hand, in any future peace negotiations between Kyiv, Moscow and possibly the US.
Belgium will probably only come on board if there are rock-solid assurances any risk from all of this is borne by the EU as a whole. That is a tall bar to clear. It probably won’t even be the trickiest bit either.
The EU would have to change how it renews its regime of economic sanctions on Russia, something it has tried and failed to do before.
At the moment, the sanctions blacklisting Russia economically need to be rolled over every six months, by unanimous approval.
The jumbo loan to Ukraine would need those rules to be changed, to only require a weighted majority of the EU’s 27 states supporting the sanctions staying in place.
This removes the risk that a rogue leader, such as Hungary’s far-right prime minister Viktor Orban or Slovakia’s populist leader Robert Fico, could block their renewal, triggering a legal and financial crisis over the status of the Russian assets.
The problem is removing national vetoes in this case and moving to majority voting rules would, itself, probably need unanimous agreement. Orban is, by nature, a transactional politician who regularly tries to extract concessions elsewhere by threatening to block the sanctions rollover. He won’t give that valuable leverage up for nothing.
