EU officials are working on back-up measures, including using an 81-year-old law involving the Belgian king to safeguard EU sanctions against Russia after Hungary threatened to veto extending the sanctions.
Hungarian Prime Minister Viktor Orbán told the other 26 EU leaders in December that he could block an extension of EU sanctions on Russia this month, which would require unanimous approval, a move that would see the measures end on January 1 Expires on March 31st.
Orban said he was waiting for Donald Trump to be inaugurated as US president on Monday. Orban said if Trump eased U.S. sanctions on Moscow, he would insist that the EU follow suit.
"Now that there is a significant change in the U.S. government . . . there should be meaningful exchanges before we decide to extend the sanctions regime for another six months," Hungary's EU Affairs Minister János Boca told reporters on Thursday. "We want to reserve our decision until we know how the U.S. government views the future of the sanctions regime."
The outgoing Biden administration on Wednesday relisted about 100 entities in the financial, energy and defense sectors under a separate law involving Congress, complicating Trump's efforts to remove the entities from a Russia sanctions list change.
While EU officials say their primary focus is persuading Orban to continue imposing sanctions on companies within the bloc and Russian sovereign assets, they are developing measures to protect at least some of those assets.
This includes approximately 190 billion euros of Russian state-owned assets located at Euroclear, Belgium's central securities depository. Profits generated from the assets will repay Ukraine's $50 billion in loans, and officials consider them a key part of a potential ceasefire.
One official said that if sanctions failed, "the money would be in Russia the next day" because financial intermediaries would have no legal basis to hold the money. Sector sanctions such as trade restrictions and oil import bans will also end.
“I am really, really worried about this, and so should everyone else,” said a senior EU diplomat who is in regular discussions with Hungarian officials. "There's a good chance Orban won't collapse."
Since state assets are actually held by Belgian entities, a fallback option is to use a wartime decree passed in 1944 that allows King Philippe to block the transfer of assets from the country, according to four officials involved in the discussions.
The palace declined to say whether it had approached the king, adding that responsibility for such decrees lay with the government, although they would need to be signed by the monarch.
The European Bank for Settlements declined to comment.
"Belgium, together with other EU member states, is doing everything possible to reach an agreement on the extension of sanctions against Russia. We have been able to reach agreements in the past and we will continue to work to ensure that this is also the case," a spokesman for the Belgian Foreign Ministry said.
Belgium has long resisted implementing national measures on fixed assets, fearing it would leave it open to legal challenges from Russia. A Belgian official said the use of special powers would violate Belgium's bilateral investment treaty with Russia.
“If Orban does not concede, the only solution is a national solution,” said a senior European Commission official involved in the preparations.
Some member states have floated proposals to strip Hungary of its voting rights in a bid to push for a renewal, but such a drastic move may not garner the unanimous support needed from all other countries.
EU foreign affairs spokesperson Anita Hipper said "efforts are underway to ensure a smooth and timely agreement among member states" to extend sanctions.
Additional reporting by Henry Foy and Marton Dunai in London and Andy Bounds in Brussels