EU leaders on Thursday appear poised to give preliminary approval to an unprecedented “reparations loan” for Ukraine, funded through Russian frozen assets. The move is viewed as critical for sustaining Kyiv’s fight against Moscow and holding the Kremlin accountable, but it carries significant legal and political risks.
To navigate these challenges, the European Commission has proposed a complex scheme it says could channel €140 billion ($162 billion) to Ukraine over the coming years.
What’s happened?
Following Russia’s invasion of Ukraine in 2022, the EU froze roughly €200 billion of Russian central bank assets. Most of these funds are held by Euroclear, an international deposit organisation based in Belgium.
G7 nations have already used the interest earned on these frozen assets to fund a $50-billion loan to Kyiv. However, as the war enters its fourth year and support from Washington wanes, Kyiv’s supporters are looking to take further measures to plug Ukraine’s budgetary gaps.
What’s the plan?
Some EU member states have called for outright seizure of Russian assets, but this approach remains a red line for many. To circumvent that obstacle, the European Commission has floated a scheme that does not touch the Russian sovereign assets directly.
Under the proposal, the EU would borrow funds from Euroclear that have matured into cash. That money would then be loaned to Ukraine, with the understanding that Kyiv would repay the loan only if Russia compensates for the damages caused.
The plan would be “fully guaranteed” by the EU’s 27 member states, who would be obliged to repay Euroclear if Moscow ultimately claims the assets without paying reparations.
Belgian demands
Belgium has emerged as the most sceptical voice, fearing potential legal challenges from Russia. Prime Minister Bart De Wever has insisted that Belgium requires firm guarantees from other EU states that liabilities will be shared if Moscow makes claims.
He has also called for other member countries to begin tapping Russian assets frozen in their territories. “Then we could go forward,” he said at the start of the EU summit. “If not, I will do everything in my power at the European level, also at the national level, politically and legally, to stop this decision.”
What’s next?
Despite Belgian concerns, EU leaders are expected to approve the European Commission’s drafting of a formal legal proposal for the loan. Antonio Costa, head of the European Council, said ahead of the talks that leaders would “take the political decision to ensure the financial needs of Ukraine for 2026 and 2027.”
EU officials hope to present a detailed proposal next month and finalise the loan by year-end. However, discussions over the finer details are expected to continue, with legal teams scrutinising the plan closely.
A key point of contention may be how Kyiv can spend the funds. France wants most of the money used to purchase weapons within Europe to support the bloc’s defence industry. The Commission currently backs that approach, but other member states argue that Kyiv should be able to acquire what it needs to fight Moscow, wherever it comes from.
Allowing flexibility in arms procurement could also help keep US President Donald Trump on board by directing some of the funds toward American weaponry.
(With inputs from agencies)
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