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.
A senior European diplomat told FT, “[French president] Macron betrayed [German Chancellor] Merz, and he knows there will be a price to pay for that… The stand-off underscores a new dynamic between Europe’s largest powers: an initiative-driven Germany and a foot-dragging France… Paris has been hamstrung by high public debt and political instability… The imbalance has dashed hopes of a major reboot of the Franco-German engine that once powered some of the EU’s biggest policy leaps.”
France nonetheless continues to be at the forefront of Europe’s efforts to cope with the dramatic shift in US attitude toward its NATO and EU allies. The spotlight on France is because it is the EU’s only nuclear power and a country with independent weapons makers. France sees Russia as a growing threat to the continent and is boosting military spending, increasing weapons production and doubling the reserve force.
But, typically, Macron is also positioning France as a potential mediator between Europe and Russia. He may be heading for bilateral talks with Putin. The Kremlin “expressed readiness to engage in dialogue” with Macron, and Elysée responded positively that it will decide “in the coming days on the best way to proceed”. Macron has called on Europeans to engage in dialogue with Putin. The irreversible nature of the Russian military offensive is sinking in at last in the ossified European mindset.
However, there is also a quintessential loner watching from across the Channel. A dangerous phase of the ‘dirty war’ lies ahead. A quote often attributed to Winston Churchill says, “Success lies in going from failure to failure without loss of enthusiasm.” Evidently, Britain will not survive a war with Russia. The residual strength of ‘Global Britain’ lies in undertaking daring covert operations. Russian ships have been attacked as far away as the Libyan coast in the Mediterranean. Ukraine lacked the expertise or capability to stage Operation Spiderweb—the June 1 simultaneous drone attacks at five air bases deep inside Russia across five time zones, including Belaya in Eastern Siberia 4300 km from Ukraine’s border.
Russian Foreign Intelligence Service (SVR) Director Sergey Naryshkin revealed last week, “Just a few days ago, I had a rather lengthy phone conversation with the recently appointed MI6 Director Blaise Metreweli.” But on Monday, yet another Russian general was assassinated in Moscow in a car bomb attack. Moscow has let it be known that the Oreshnik, the hypersonic missile that can reach Britain in 11 minutes, and the S-500 air defence system have been put on ‘combat duty’.
All in all, the European summit was further confirmation of the growing discord and fatigue over the Ukrainian conflict and the lack of a unified strategy for ending it. This will affect the prospects for a settlement. It is inevitable that the search for settlement will be increasingly based on new political realities. Indications are that Russian forces are moving in the direction of Odessa, Kharkiv and Sumy as well as Dnipropetrovsk, the most important industrial region of Ukraine.
Russian officials are sceptical about the nascent peace process. They anticipate the military offensive to continue into next spring. The Kremlin elites are sensitive to the national mood that, having come this far, Russia must ensure this is a war to end all wars in the region.
Following the latest consultations of Putin’s special envoy Kirill Dmitriev with his American counterpart Steve Witkoff through Sunday in Miami, US Vice President J D Vance touched the right chord: “The breakthrough I do feel we’ve made is that all of the issues are actually out in the open… I wouldn’t say with confidence that we are going to get to a peaceful resolution. I think there is a good chance we will, I think there is a good chance we won’t.”
Indeed, although a settlement for Ukraine has clearly taken the centre-stage, Russia’s priority also lies in stabilising the relationship with the US. There is talk of Moscow hosting Trump, Vance and State Secretary Marco Rubio early next year. On their part, the Americans are working on Putin’s possible visit to attend the G20 summit in Miami. Preparations for a meeting between American congressmen and Russian Duma members are also under way. Changes in US policy toward Russia can also be seen in the new national security strategy, which explicitly disfavours Nato’s “endless expansion”.
M K Bhadrakumar | Former diplomat
(Views are personal)