The plan is facing obstacles. Belgium, which holds the assets, blocked it during an EU summit this week, citing legal ramifications and the risk of retaliation from Russia. However, Europeans are clear that they do not want their taxpayers to pay for the destruction caused by Russia, so there is little alternative. They agree on what needs to be done, but not yet on how to do it.
By Jorge LIBOREIRO
A bold plan to use Russia’s frozen assets to provide a 140 billion euro loan to Ukraine has been blocked by EU leaders. Here’s why. The European Union is rushing to find ways to shore up Ukraine’s finances as the war shows no sign of ending and costs mount.
The urgency has increased as the Trump administration has made clear that it will fall to Europe to shoulder the burden for the continent’s security. With the US withdrawing, the Europeans are considering a bold plan to use frozen Russian assets to provide a €140 billion reparations loan to Ukraine, which could help cover the country’s financial and military needs through 2026 and 2027.
OBSTACLES
The plan is facing obstacles. Belgium, which holds the assets, blocked it during an EU summit this week, citing legal ramifications and the risk of retaliation from Russia. However, Europeans are clear that they do not want their taxpayers to pay for the destruction caused by Russia, so there is little alternative. They agree on what needs to be done, but not yet on how to do it.
HOW DID WE GET HERE?
In the first week of Russia’s full-scale invasion of Ukraine in early 2022, the EU and its G7 allies imposed unprecedented sanctions on the Kremlin. One of them was to freeze the Russian Central Bank’s assets in the West to cut off Moscow’s ability to finance the war. For the EU, this meant 210 billion euros in economic and political leverage over Russia, as most of the assets are held at Euroclear, a central securities depository in Brussels. They generate annual profits of 2.5-3 billion euros for the Belgian government. After months of debate, the EU began using these revenues to help Ukraine, later joining in with a joint G7 loan of 45 billion euros. But with Russia showing no willingness to make peace, this amount is being seen as insufficient.
WHAT IS A REPARATION LOAN?
The European Commission examined the assets in Euroclear (the Brussels-based bank of seized securities), which have been converted into a cash fund of around €175 billion, with an additional €10 billion expected. Under the plan, Euroclear would transfer these funds to the Commission, which would provide a €140 billion loan to Ukraine, while the rest would cover the G7 loan. The loan would be disbursed in installments, with certain conditions, for example, that the weapons purchased be of European manufacture. Ukraine would only pay it back after Russia ended its aggression and agreed to compensation – hence the name “reparations loan”. The Commission stresses that this is not a confiscation, as the assets would be returned to Russia after compensation. Politically, the plan is attractive because it would provide a stable line of aid to Kiev without directly burdening member states.
WHY BELGIUM IS THE MAIN OBSTACLE
As the country where the frozen money is held, Belgium has a key role. It has an investment treaty with Russia that provides for arbitration in the event of disputes. Belgium fears that once the funds leave Euroclear, Moscow will retaliate and seek huge compensation in international courts. Prime Minister Bart De Wever is calling for “full joint guarantees” from all EU countries. In theory, each country would back a share of the loan in proportion to its size. “If you take the money from my country and something goes wrong, I am neither able nor willing to pay 140 billion euros, in a week,” De Wever said after the summit. He added that there was little enthusiasm for sharing responsibility.
WHAT THE EUROPEAN CENTRAL BANK SAYS
President Christine Lagarde has previously warned against any action that could be seen as a seizure of sovereign assets, as it would damage the reputation of the euro and violate international law. However, the current format is not a seizure, because Russia could recover the funds if it pays reparations (although this is unlikely). Lagarde has not opposed the plan, but has called for more technical work and the involvement of G7 allies. De Wever has called for full transparency to reveal where the assets are located across Europe.
WHAT OTHER COUNTRIES SAY
Most member states understand the Belgian position. German Chancellor Friedrich Merz said: “I would use the same argument if the assets were in Germany.” Dutch Prime Minister Dick Schoof added that “the risk should be shared by everyone, not just Belgium.” Hungary, meanwhile, has refused to participate. Diplomats say compensating Belgian companies in the event of Russian retaliation is unacceptable. Austria’s recent case to compensate an international bank that lost 2.1 billion euros in Russia was not supported by others.
ALTERNATIVES
Leaders have asked the Commission to explore other options to cover Kiev’s financial needs for the next 2-3 years. One possibility is for countries themselves to go to the markets to raise funds, as was done in 2023 with the 50 billion euro Ukraine Facility. But this would be difficult for countries like France and Italy, which are already burdened with debt.
President Macron said the discussion did not rule out the proposal, but raised “technical issues that need to be clarified.” Commission President Ursula von der Leyen added: “We agreed on what we want to do – now we need to define how to do it.” An updated version of the plan is expected to be presented before the December summit, considered a crucial moment. Ukrainian President Volodymyr Zelenskyy said the country needs the funds by early 2026: “I don’t know if it’s possible. Not everything depends on us. It’s a political decision.”
