EU nears Russian asset freeze deal to ease Ukraine loan

Golden church domes beyond fortified walls in the Kremlin palace complex in Moscow. (Bloomberg)

The European Union is set to approve a deal on Friday that would lengthen the bloc’s freeze on Russian assets using emergency powers — a key step toward tapping the funds to help Ukraine.

The European Commission, the EU’s executive branch, presented the proposal on Thursday, which envoys tentatively approved, paving the way for a final agreement on Friday, according to people familiar with the matter.

The issue has become a major sticking point in EU attempts to secure a €90 billion ($105 billion) loan for Ukraine using immobilized Russian central bank assets.

Currently, all 27 EU member states must renew the asset freeze every six months, leading to concerns that Hungary or anyone else could veto and give Moscow a sudden claim to its funds.

The commission’s proposal would extend the six-month cycle and only require a qualified majority of countries to support each renewal, the people said, speaking on the condition of anonymity. The would essentially ensure that up to €210 billion in Russian assets remain on EU soil.

The bloc’s executive arm is looking to split the extension decision from the bigger prize of tapping the funds to provide loans to Ukraine, as that debate is not yet settled, said the people.

The vast majority of member states back the strategy, the people said. However, some countries are hesitant and Hungary is strongly opposed, they added. Hungary has even threatened to veto the renewal of other Russia sanctions in retaliation, in addition to suing the commission, according to other people familiar with the matter.

Hungary did not immediately reply to a request for comment.

The extension is meant to address a main concern for Belgium, which has held up the Russian assets loan plan.

Belgium, which houses most of the Russian funds at the Euroclear financial institution, has argued that it could be left on the hook to repay the loan if the money was suddenly unfrozen. Because of that, Belgium is seeking robust guarantees from the EU and member states to mitigate those risks.

EU leaders are aiming to sign off on the loan when they meet in Brussels on Dec. 18.

The loan plan, which the commission unveiled last week, would shift Russian funds to Ukraine over the next two years to help cover the country’s basic services, economic and military needs. Additional funds could be deployed in 2028 and beyond. The money would be paid back only if Russia repairs the damage it caused during the war.

Moscow would retain a legal claim on the assets, however, which has left Belgium anxious that it could face repercussions.

Belgian Prime Minister Bart de Wever on Wednesday did not rule out taking legal action if the plan goes through over his objections.

“Belgium is still a country that wants to arrive at a solution at European level, and a good solution. I don’t think this is a good solution,” he said, speaking to the Belgian parliament.

“This is a lot of work to accomplish in a week,” he added, encouraging the EU to instead revisit a proposal to borrow money for the loan.

EU officials say ensuring the assets are safe from a sudden veto would help address Belgium’s concerns, along with guarantees covering the risks linked to the small chance Moscow wins back the assets in court. A mechanism to release money in case the Russian courts snatch local Euroclear funds has also been previously agreed.

“We are working on fine tuning the legal and technical solution that could obtain the agreement of a least a qualified majority of member states,” European Council President Antonio Costa, who will chair next week’s EU leaders’ meeting, said on Tuesday. “I think we are very close to obtaining a solution.”

Ukraine’s allies are under growing pressure to find fresh sources of financing after US President Donald Trump’s administration largely stopped aid to the war-ravaged country. As peace talks between Washington, Moscow and Kyiv intensified in recent weeks, the US has also suggested it could use the assets for post-war investments.

Ukraine will need €135 billion over the next two years to cover vital budget gaps, according to its donors. Kyiv has told allies that it needs fresh funds by April.

German Chancellor Friedrich Merz, a vocal proponent of the Russian asset plan, earlier this week called the immobilized funds Europe’s “most powerful current lever.” On Thursday, he indicated progress on the plan may be imminent.

“The process may move forward another step this week,” he said during a press conference in Berlin.