The European Commission will move ahead with a controversial proposal to fund Ukraine with a loan based on Russia’s frozen assets, it has announced.
But in a concession to concerns raised by Belgium, which hosts most of the assets, the EU executive has also proposed another option: an EU loan based on common borrowing.
The European Commission president, Ursula von der Leyen, said on Wednesday the two proposals would ensure “Ukraine has the means to defend [itself] and take forward peace negotiations from a position of strength”.
The publication of a long-awaited legal text of the reparations loan comes ahead of an EU summit later this month at which EU leaders are being urged to agree a two-year funding plan for Ukraine to avert a looming cash crunch.
Leaders failed in October to agree on a proposed “reparations loan” to Ukraine using the Russian assets, but the question is becoming increasingly urgent, with Kyiv forecast to run out of money from next spring. EU officials estimate Ukraine needs €136bn (£119bn) in 2026 and 2027 to continue its defence and keep the country running.
The stakes became even higher after the Trump administration floated a plan to invest some of Russia’s frozen assets in joint US-Russia projects, as well as taking profits from $100bn (£75bn) of the funds that it had earmarked to reconstruct Ukraine. European leaders strongly pushed back against these ideas, which were part of a 28-point plan for Ukraine that has since been amended.
About €290bn of Russia’s sovereign wealth in the west was frozen after the full-scale invasion of Ukraine in 2022. Most of those funds are held in Europe, above all in Belgium. Euroclear, a central securities depository in Brussels, holds €183bn of the Russian assets and fears that any use of the assets could be tantamount to confiscation, therefore violating international law and triggering a slew of legal cases.
EU officials have always downplayed legal risks, arguing that Russia would maintain ownership of the funds. They propose an EU loan for Ukraine secured on the Russian assets. The plan hinges on the assumption Moscow will one day pay reparations to Kyiv and that Russia’s assets will remain frozen for the foreseeable future.
Von der Leyen said on Wednesday the reparations loan would have “strong safeguards for our member states”, a response to the Belgian prime minister, Bart De Wever, who has argued Belgium could face a multibillion-euro bill if Euroclear was sued by Russian individuals and companies.
The commission president rejected his argument that using the frozen assets would be an obstacle to any peace deal. De Wever has said the reparations loan plan was “fundamentally wrong” and would be an obstacle to any peace deal, because the frozen assets could then not be used for the reconstruction of Ukraine.
Von der Leyen said: “We are increasing the cost of Russia’s war of aggression and this should act as a further incentive for Russia to engage at the negotiating table.”
Belgium’s foreign minister, Maxime Prévot, said his government continued to see the reparations loan as “the worst of all” options. Arriving at a meeting of Nato ministers in Brussels, he said: “The text the commission will table today does not address our concerns in a satisfactory manner. It is not acceptable to use the money and leave us alone facing the risks.”
He also said Belgium had been frustrated with “not being heard” and having its concerns “downplayed”.
But Belgium has secured a partial victory, with the commission on Wednesday proposing its preferred option of an EU loan for Ukraine using unallocated funds in the EU budget as collateral. Belgium argues this is the least risky way to fund Ukraine, but many EU governments are reluctant to venture into more common borrowing.
The EU foreign policy chief, Kaja Kallas, a strong advocate of the frozen assets plan, said earlier this week that “raising capital together is also out of the question for some member states”. She said she was not seeking to “diminish the risks or the worries the Belgian government has”, but argued that a loan based on Russian assets was the best option and would “definitely strengthen European position vis a vis Moscow”.
