After months of debate, EU leaders will decide on Thursday whether or not to use Russia’s immobilised assets to fund Ukraine in what could be a make-or-break moment for Europe.
What is the plan?
The EU has frozen €210bn (£184bn, $247bn) of Russian central bank assets which are mostly held at Euroclear in Brussels. As the fourth anniversary of the full-scale invasion approaches, the EU wants to use this money to generate a loan for Ukraine.
Under the complex plan, the EU would borrow from Euroclear to provide Ukraine with an initial €90bn loan, about two-thirds of Kyiv’s funding needs for 2026 and 2027. The EU expects Ukraine’s other allies to provide the rest.
Kyiv would only repay the money to the EU if and when Russia agreed to pay reparations for the colossal damage inflicted during the war. The EU would then repay Euroclear. Throughout the cycle, Russia would remain the legal owner of the assets.
Euroclear, often described as a bank for banks, was until recently a little known part of global financial plumbing. It is now looking after €40.7tn worth of assets for its clients, who include central banks, investment banks and supranational organisations. The company has its roots in the Belgian outpost of what became the Wall Street bank JP Morgan. It does not hold any paper money, but enables the electronic exchange of cash and securities (a stock, a bond or some other instrument to raise capital).
Why now?
EU leaders agreed in 2024 to take the interest on Russia’s frozen sovereign wealth for Ukraine. But touching the assets is a much more controversial step. Decision-makers in Brussels, Paris and Berlin feared damaging global investor confidence in the eurozone.
The calculus changed in October when Germany’s relatively new chancellor, Friedrich Merz, came out decisively in favour of a plan to use the assets without confiscation. Germany shares concerns about eurozone stability, but sees the bigger economic threat coming from Russia’s imperial ambitions.
Meanwhile, Donald Trump has halted new US military aid for Ukraine. European nations, grappling with stagnant economies and public spending pressures, are not doing nearly enough to fill the gap, according to the Kiel Institut in Germany.
And Ukraine is running out of money fast: Kyiv needs an estimated €136bn in 2026 and 2027 to fund its defence and keep afloat, according to the European Commission. Without new funds by spring, Ukraine risks going bankrupt, unable to pay soldiers, teachers and police.
Trump’s proposals for US companies to profit from the Russian assets, including via joint projects with Russia, have also galvanised European leaders to secure them for Ukraine.
What does Russia say?
Vladimir Putin has said using the frozen assets to finance a loan would be akin to “theft of someone else’s property”. The Russian president and his advisers have issued dark warnings about the consequences for European economic stability and investor faith in the eurozone.
The Russian Central bank has launched a $230bn claim for damages against Euroclear, which is already fighting more than 100 legal cases in Russia. Putin has signed a series of decrees, most recently in October, making it easier for the Kremlin to seize western private and state assets in Russia, in retaliation for any confiscation of assets.
Why does Belgium oppose the idea?
Belgium, the host of the lion’s share of the assets, has described the EU plan as “fundamentally wrong”. The Belgian government argues the plan would be seen as confiscation and that without strong EU guarantees, it could be left with multibillion euro bills if Moscow is successful in suing Euroclear and seizing Belgian property in Russia.
While EU courts would not recognise a Russian court judgment, Moscow-friendly jurisdictions, such as Kazakhstan or China, could seek to enforce any claim against Belgium by seizing assets in their countries.
Belgium has said it will not accept the plan unless all its concerns are met, including cast-iron guarantees from other EU countries covering 100% of any claims against Euroclear. The Belgian government also wants other countries with Russian frozen assets to use them for Ukraine, including the UK, Japan, Canada, the US, Switzerland and Norway.
Is there an alternative?
In theory, there is a plan B. EU member states could use unallocated funds in the EU budget as collateral for a loan for Ukraine – a tried-and-tested method of raising money, which was proposed by the European Commission this month. Belgium, backed by Italy, Bulgaria and Malta, argues this is a legally safer way to help Kyiv, leaving the Russian billions intact for Ukraine’s reconstruction.
Other officials involved in the decision argue the frozen-assets plan is the only real option. Borrowing secured against the EU budget requires unanimity and Hungary’s anti-Ukraine government has already said it would veto such a move.
The reparations loan, in contrast, only requires a majority agreement. In theory Belgium could be outvoted, but high-ranking EU officials have indicated they do not want to go down that road.
What happens if there is no agreement?
If the summit, scheduled to run on Thursday and Friday, ends with no clear plan to fund Ukraine, the EU’s credibility would be in tatters. Europe would find it even harder to sway peace talks orchestrated by a transactional US president who has already dismissed the continent’s leaders as weak.
Merz issued a stark warning about the risks of failing to agree the frozen assets plan: “If we do not succeed in this, then the European Union’s ability to act will be severely damaged for years, if not longer, and we will show the world that we are incapable of standing together and acting at such a crucial moment in our history.”
And if there is a deal what next?
Agreement would trigger an outpouring of relief, but the difficulties would be far from over. Even if EU leaders sign off on the frozen assets idea, it would still need to be turned into law to meet Ukraine’s urgent military and civilian needs by springtime.
Decisions on the immense cost of rebuilding Ukraine – $524bn, €506bn by the latest estimate – remain unclear. Any peace agreement also has to resolve the issue of Ukraine’s borders and security when Russia shows no obvious interest in ending the war.
