Reparations loan to Ukraine: the end of the veto right in foreign and security policy?

On October first in Copenhagen, EU heads of state and government will discuss, in particular, the proposal announced by Ursula von der Leyen on 9 September during her State of the Union address to grant Ukraine a €140 billion “reparations loan”. To circumvent the Hungarian veto, the terms of this loan could be decided by a qualified majority within the Council of the European Union, marking a major turning point for the common foreign and security policy, which has been largely paralysed until now by the unanimity rule.

This loan would be secured against some €185 billion in Russian assets seized and frozen at Euroclear in Brussels, the European clearing house. This would be a way of using these funds in practice without actually seizing them directly. Many European governments fear that outright expropriation would penalise the euro and its attractiveness as a reserve currency for non-European countries. This loan would only have to be repaid by Ukraine once Russia had paid reparations. This money would be used to finance Ukraine’s war effort and other budgetary needs as necessary.

Doubling European aid without asking European taxpayers

Such a loan would obviously have the enormous advantage of enabling the EU to provide very substantial additional support to Ukraine, almost doubling the aid provided by Europeans since 2022 (€167 billion according to the Kiel Institute), without burdening with a single cent the already strained budgets of the Union and its Member States. And this at a time when no US financial aid has been reaching Ukraine for many months now and there is no prospect of any being released in the foreseeable future.

However, as usual, this decision is likely to be vetoed by Hungarian Prime Minister Viktor Orban, who for almost four years now has systematically blocked any form of European support for Ukraine. However, he usually ends up giving in after lengthy negotiations, which inevitably result in costly concessions for the EU. He has nevertheless managed to completely block the use of the European Peace Facility to provide joint military aid to Ukraine. Six billion euros had been earmarked for this purpose, but have not been disbursed for over a year. Today, only bilateral national aid is available in the military field.

How can Viktor Orbán’s veto be circumvented?

Under these circumstances, how can we prevent Viktor Orban, possibly with the help of his Slovakian ally Robert Fico, from once again causing the European Union to lose precious months in implementing this project, which is essential for both Ukraine and Europe, or even from succeeding in derailing it entirely?

Article 7 of the Treaty on European Union provides for the possibility of depriving a Member State of its voting rights in the Council “in the event of a serious and persistent breach by [that] Member State of the values referred to in Article 2 [of the EU Treaty]”. However, this finding must itself be established unanimously, and many Member States are reluctant to use this ” nuclear weapon”. Would it be possible to initiate such a process with a greater chance of success, not on the basis of non-compliance with democracy and the rule of law as envisaged so far, but on the basis of a breach of solidarity in geopolitical matters, an accusation of collusion with the enemy, so to speak? This is what our colleagues at the Jacques Delors Centre in Berlin recently suggested.

However, this is not the only possible way to overcome the deadlock created not only by Hungary but also by a small minority of Member States, should others join them. The common foreign and security policy is certainly one of the few areas where the unanimity rule continues to apply under the Treaty on European Union. However, in Title 5 of this Treaty, which defines this policy, Article 31 stipulates that “by way of derogation from paragraph 1 [which provides for unanimous voting], the Council shall act by qualified majority:

• When adopting a decision defining an action or position of the Union on the basis of a European Council decision on the Union’s strategic interests and objectives, as referred to in Article 22(1) [i.e. in the field of foreign and security policy]
• When adopting a decision defining an action or position of the Union on a proposal from the High Representative of the Union for Foreign Affairs and Security Policy submitted following a specific request made to him or her by the European Council on its own initiative or on the initiative of the High Representative.
• When it adopts any decision implementing a decision defining an action or position of the Union.

Qualified majority voting may be used

And, according to Politico, this is the provision that Europeans could use in the case of the “reparations loan” to circumvent the Hungarian veto. Based on previous decisions taken by the Council concerning frozen Russian assets, the legal texts establishing this loan would be considered to be merely implementing measures for those decisions, which can therefore be approved by qualified majority.

This article of the Treaty has been known for a long time and this possibility has been discussed within European bodies, but until now no one had dared to use it. Member States feared that they would lose their own veto power in the future, as the possibilities opened up by Article 31 to bypass unanimity are, in practice, very broad if one starts to use them. They also fear that the European Council will become bogged down in detailed discussions on each measure if it becomes the only place where the right of veto can still be exercised.

A revolution without amending the Treaty

However, in a context where the threats to the Union are major and where the game played by some Member States is helping our enemies to weaken the EU, it is high time to give the Union a real capacity to act in foreign and security policy by reducing the scope of the unanimity rule.

If this is indeed the procedure ultimately followed to decide on this ‘reparations loan’ and if this procedure withstands the challenges that are sure to be brought before the Court of Justice, we will have witnessed a Copernican revolution in common foreign and security policy. If this procedure is then generalised, as permitted by Article 31 of the Treaty, it would help to give the European Union the agility it needs in an essential area for its survival, without the need to amend the Treaty.