Senior EU figures have acknowledged that Ireland's neutrality constraints must be taken into account as the European Union edges closer to converting €140 billion in frozen Russian assets into a loan for Ukraine.
As EU leaders debate the issue at a summit in Brussels, negotiations on how to support Ukraine both financially and militarily in the face of the Russian onslaught are at a delicate stage, particularly over the legal and solidarity implications of utilising Moscow’s frozen assets.
Because the bulk of the Russian central bank assets are held in the Belgian securities depository Euroclear, the Belgian government has been adamant that it should not be on the hook alone for the €140bn, should any potential future legal case find in favour of Moscow.
Belgium, for legal and financial reasons, had held out against any move to seize assets ever since they were frozen by the EU, G7 and other countries within days of Russia’s full-scale invasion of Ukraine in February 2022.
However, the Belgian government has softened its position in recent months. It is prepared to allow the frozen assets to be converted into a loan for Ukraine, but only on the basis that other EU member states act as co-guarantors.
Belgian sources say the country is still seeking clarity on how the solidarity mechanism will work.
The problem for the Irish Government is that Ireland - should it agree to join the vast majority of other EU member states and act as a co-guarantor - would be underwriting money that will ultimately be used to support Ukraine militarily.
Until now, any of Ireland’s contributions to Ukraine have been of a non-lethal nature.
Whereas technical methods of getting EU funds to Ukraine through, for example, the so-called European Peace Facility (EPF) - as a way to sidestep Hungary’s continued blocking of support - have been a straightforward issue for Ireland as it has been able to specify that any Irish contributions were non-lethal in nature.
However, the use of frozen Russian assets potentially complicates that.
The EU’s plan is that €140bn out of a total of up to €200bn in Russian central bank assets held in Euroclear would be given as a loan to Ukraine.
Ukraine would repay the loan, but only when Russia begins to pay reparations to Ukraine for its invasion at some theoretical point in the future.
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This manoeuvre gives the EU cover to claim that it is not "seizing" the assets, rather using them as a loan.
Member states - including Belgium - acknowledge that with the Trump administration phasing out financial support for Ukraine, the country’s financial and military needs are greater than ever.
It has been estimated that the cost of reconstruction now stands at $524bn.
Ukraine has argued that it should have discretion to use the €140bn both for military support, and to meet some glaring civilian and budgetary needs.
Germany and others insist that the money should only be used on weapons to allow Ukraine to defend itself, and to give it a stronger position should peace negotiations materialise.
The Irish Government supports a mechanism that would allow the frozen assets to be used both for both military and civilian purposes, precisely because that would allow the state to sidestep any suggestion that it is underwriting the use of frozen Russian assets only for military uses.
Senior EU figures have acknowledged the difficulty facing the EU’s four neutral member states - Ireland, Austria, Malta and Cyprus - in joining a guarantee that ultimately will provide Ukraine with badly needed military support.
Hungary and Slovakia, which have constantly frustrated the EU’s support for Ukraine, have ruled out acting as co-guarantors.
The fewer the member states acting as guarantors, the bigger the risk facing those countries that have agreed to underwrite the €140bn, officials say.
For that reason, the European Commission is understood to be anxious to keep neutral countries like Ireland on board and that the process of agreeing will mean catering for countries which have constitutional and political concerns.
The Commission is expected to produce a legal text in early November with a view to the Russian assets being converted into a loan for Ukraine by the end of the year.
Irish sources have acknowledged there will not be any clarity on the nature of the transaction until the European Commission produces its legal text in early November.
In a statement last Thursday, the Russian Embassy to Ireland warned that any utilisation of frozen Russian assets would be regarded as "grand theft" and could ultimately lead to the collapse of the European economy.
