THE MOSCOW-KYIV CONFLICT STRAINS PARIS-BERLIN TIES

EU's decision to issue bonds to give Ukraine a loan-and not use frozen Russian assets-exposed new chasms. Meanwhile, the Americans are preparing for dialogue with the Russians

- M K BHADRAKUMAR

THE European Union summit last Thursday in Brussels turned out to be a pivotal event.

The highlight was the EU's decision not to tap Russia's frozen wealth, estimated to be around 210 billion held under member states' jurisdictions, with the largest chunk of over 180 billion at Euroclear in Belgium.

The EU, instead, chose to offer Ukraine a financial lifeline by raising a 90-billion Eurobond against its budget. Cracks have appeared in the bloc's unity. A growing number of EU countries are no longer convinced that the war can be salvaged.

Basically, the obstacles to the sequestration of Russian funds were not technical but political. Belgium objected to illegal seizure, insisting it should be a collective responsibility to bear the consequences of any Russian retaliation. Italy and Austria felt the same way. At the summit, France defected at the last minute and folded in behind Italy, which has isolated Germany.

Kyiv's ability to repay the loan after the conflict is doubtful. But the EU is committed to paying at least 3 billion in interest annually. The endgame can be either a complete write-off of the loan, or Russia agreeing to pay reparations-or, Ukraine winning the war. To navigate the dangerous shoals ahead, the EU has indefinitely extended the freeze on the Russian sovereign assets, signalling readiness to accept legal and diplomatic risks to maintain control of the funds.

To be sure, the fate of Russia's frozen assets in Europe has become a flashpoint. On the one hand, it reveals deep divisions within the West. On the other, it raises urgent questions about the future of international finance. The debate has exposed not only legal and financial anxieties, but also the shifting sands of global power and trust.