Belgium, France and the UK have been accused of holding back billions of Euros of profits earned from holding frozen Russian assets as the European Commission (EC) scrambles to raise a €210bn Reparation Loan to continue funding Ukraine in its war against Russia.

Next week, the EU members are due to vote approving a Reparation Loan of up to €210bn to support Ukraine that will leverage the Central Bank of Russia's (CBR) frozen assets held in European accounts.

The International Monetary Fund (IMF) said last week that Ukraine's current financing gap over the next four years is estimated to be $136.5bn with a $63bn short fall in 2026 to 2027 alone. Without fresh funding, economists say that Kyiv will run out of money by April at the latest and could face a macroeconomic collapse.

Belgium

The first vote in October failed after Belgium, where the bulk of the money is held, objected over legal risks associated with seizing the funds – a legally unprecedented move.

Other EU member states have been accused of having ulterior motives and using taxes earned on profits of the invested frozen money to bolster its own budget.

Since the money was frozen the European depository in Brussels Euroclear reported €5.4bn in profit from frozen Russian assets. In just the first half of 2024, it earned an additional €2.4bn from the cash these profits have generated. Under Belgian law, Euroclear pays a 25% corporate tax rate, meaning the Belgian treasury stood to collect over €1bn in tax revenue from these profits in 2023 alone. Unlike commercial banks, Euroclear is not contractually obliged to pay interest to Russia.

The controversy was this tax income is paid into the national budget, prompting accusations that the government was profiting from sanctions imposed on Russia and using the proceeds for domestic spending. The government claims that it has passed the profits to Ukraine, but it has not stuck to an agreement made last year to open its books to inspection.

France

Now, France has been caught up in a similar scandal, the Financial Times reported on December 9. France holds the second-largest volume of Russian state assets in the EU after Euroclear. Other EU countries hold negligible amounts.

Paris is under pressure from partner countries to release the details on €18bn of Russian sovereign assets immobilised at French commercial banks. The authorities have refused to name the banks or explain what has happened to any accrued interest earned, citing client confidentiality. The Élysée Palace, French Treasury, central bank and economy ministry all declined to comment.

The lack of transparency matching Brussels’ tight lipped policies is frustrating the European Commission as it becomes increasingly desperate to scrounge up enough money to keep Ukraine in the war.

In addition to Belgium’s refusal to play ball, in the meantime, the European Central Bank (ECB) and the International Monetary Fund (IMF) have both come out objecting to the idea of the Reparation Loan, suggesting its illegal.

Japan joined the fray on December 8, when the Finance Minister said that it would not participate in the scheme and not release the €30bn of Russian assets frozen in Japan.

The new EU proposal aims to include the roughly €25bn held at commercial banks across France and Belgium, in addition to the €185bn immobilised at Brussels-based Euroclear — the only institution to have disclosed its holdings. French banks, by contrast, have provided no public details, with officials citing market sensitivity.

“This is market-sensitive information — it’s the same as if doctors would be publicly discussing medical records,” European Commission spokesperson Olof Gill told the Financial Times.

The bulk of France’s €18bn of Russian state assets are held at BNP Paribas, the country’s largest lender, according to FT. BNP Paribas denied to the paper that it holds any Russian assets in its French banks, but its subsidiary in Belgium declined to comment.

UK

As of late 2024, the United Kingdom holds approximately GBP26bn ($33bn) in frozen Russian state assets, primarily from the Central Bank of Russia, according to official disclosures and reports. That does not include privately-owned assets of Russian oligarchs and companies.

Last year the UK publicly support the G7 plan to extend a loan of €50bn to Ukraine that went through, however, the UK declined to commit its entire stock of frozen Russian money to the scheme and earmarked only GBP8bn ($10bn) — a figure significantly below what the EU and Ukraine had expected.

British officials cited “legal complexities” around diverting profits from frozen state assets as the reason for its caution, including concerns about “potential litigation from Russia” – precisely the same reason that Belgium has cited.

The G7 loan is being coordinated separately from the European Commission’s broader Ukraine Facility, a proposed €50bn multi-year financial package for Kyiv. However, the Commission has indicated that €45bn of the total €210bn it aims to raise under the Reparations Loan framework could be allocated to repay the G7-backed loan, once proceeds from Russian assets begin to flow.