EU to propose tapping €210bn in Russian assets for Ukraine loan

Good morning.

Today, our finance correspondent previews a European Commission proposal to use Russia’s immobilised assets for Ukraine. Laura then reports from the Belgian laboratory designing ways to protect Europe’s skies from drones, and our Rome reporter explains why Giorgia Meloni is big in the Gulf.

Thaw

The European Commission will today propose using Russian immobilised assets worth up to €210bn to fund a loan for Ukraine, according to four people briefed on the matter, writes Paola Tamma.

Context: Brussels has been working on a “reparations loan” to cover Kyiv’s financial needs for the coming two years, and has sped up work in response to US-led peace talks.

But opposition from Belgium, where most of the assets are held, and scepticism from other capitals have led to months-long negotiations over alternative funding options.

The commission is expected to suggest two ways forward today.

One is tapping the full value of Russia’s foreign reserves held under sanctions in Belgium and other EU countries, equivalent to €210bn, according to four people. The second is using leftover borrowing capacity in the shared EU budget for a smaller loan — which would require unanimous approval from the EU27, two of the people said.

Most EU countries prefer leveraging Russia’s assets, but Belgium opposes the plan, citing legal and financial risks. Meanwhile, Hungary has ruled out supporting further Ukraine funding.

A decision is expected at an EU leaders’ summit on December 18, but it won’t be an easy one.

Eyes in the sky

At a remote laboratory in the Flemish town of Geel, scientists are working to flesh out the EU’s plans on how to bolster its drone defences, writes Laura Dubois.

Context: European countries have been inundated by suspicious drone incidents that have disrupted air traffic. Authorities in several countries have pointed the finger at Russia, as sabotage and other hybrid attacks mount as well.

In response, the commission has proposed constructing a “drone wall” to protect Europe. It has announced a European Drone Defence Initiative for early next year including “counter-drone capabilities for detection, tracking, and neutralisation”.

At the commission’s Joint Research Centre in Geel, scientists are advancing work on those plans.

“Russia is testing us, it will not stop,” EU research commissioner Ekaterina Zaharieva said yesterday during a visit to the laboratory. “It didn’t start with the war, but now it’s very intensive with the development of these drone technologies.”

“We should really develop fast technologies that can detect those drones, and that’s why this lab is so important,” Zaharieva added.

The lab has been working on drone defences for critical infrastructure such as hospitals, energy plants or airports since before the 2022 Ukraine invasion, developing a multi-layered detection and defence system.

During the visit, scientists demonstrated how to detect different drones, for instance by intercepting the signals between the drone and its pilot, or using radar, cameras and acoustic sensors. They also showcased jammers to hinder drone communication.

The commission’s initiative will use the EU budget to fund such anti-drone technologies for EU countries, according to the announcement.

Chart du jour: Cop that

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Demand for copper is being boosted by the construction of grid infrastructure to power the green transition and AI data centres.

Outreach

When leaders of the Arab states gather for their annual powwow in Bahrain today, they will have an unusual guest: Italy’s Prime Minister Giorgia Meloni, writes Giuliana Ricozzi.

Context: Rome has been working to consolidate relations with the Middle East. Meloni has toured the Gulf multiple times and her government has signed several agreements with countries such as Saudi Arabia and the UAE.  

The invitation to join the Gulf Cooperation Council Summit, attended by all Gulf states, is a political win for Meloni, given only a few foreign leaders have attended previously, including Turkey’s Recep Tayyip Erdoğan, China’s Xi Jinping and former French president François Hollande. 

During the summit, the Italian leader will deliver a speech on mutual co-operation and the future of the Middle East, officials said. 

Meloni’s presence suggests that Gulf nations see the relationship with Rome as “solid”, and her as a “privileged interlocutor” on big geopolitical issues, the officials added, including possible solutions to the conflict in Gaza. 

In a bid to show her commitment to the crisis in the Middle East, next week Meloni will also welcome the president of the Palestinian National Authority, Mahmoud Abbas, as special guest of Atreju, the annual jamboree of her rightwing Brothers of Italy party.

Meloni’s diplomatic outreach comes as her Italian opponents accuse her of being too weak in condemning Israel’s actions in Gaza, and she faces large protests over Rome’s handling of the conflict.

What to watch today

1. Nato ministers of foreign affairs meet in Brussels.

2. French President Emmanuel Macron travels to China for a three-day visit and meeting with Chinese President Xi Jinping.

Now read these

• Elephant in the room: How a cuddly toy from Ikea symbolises the absurdities of the EU’s single market for goods, and its often invisible barriers.

• Rule of law rollback: Slovak Prime Minister Robert Fico is preparing to scale back protections for whistleblowers.

• ‘Made in Europe’: Brussels is pushing for 70 per cent of critical goods such as cars to be manufactured domestically, to cut reliance on China.