EU leaders face crunch decision on loaning Russia’s frozen cash to Ukraine

European Union leaders are meeting for a Brussels summit where a key decision will be made on whether Ukraine will borrow tens of billions of euros from frozen Russian assets to finance its military and economic needs.

Most of Russia’s €210bn (£185bn; $245bn) assets in the EU are held by the Belgium-based organization Euroclear, and so far Belgium and some other members of the bloc have said they oppose the use of cash.

Without an increase in funding, Ukraine’s finances will be depleted within a few months.

A European government official said he was “cautiously optimistic, not overly optimistic” that a deal would be reached. Russia warned the EU not to use its money.

He filed a lawsuit against Euroclear in a Moscow court to get his money back.

The Brussels summit comes at a pivotal moment in the war and all eyes are on Belgian Prime Minister Bart De Wever, who told the Belgian parliament on Thursday: “I have not yet seen a text that would persuade me to change Belgium’s position.”

US President Donald Trump said a deal to end the war that began with Russia’s full-scale invasion of Ukraine in February 2022 is closer than ever.

US and Russian officials will meet in Miami this weekend for further talks on the peace plan, a White House official told AFP news agency. Kremlin envoy Kirill Dmitriev is thought to meet with Trump envoys Steve Witkoff and Jared Kushner. Ukrainian officials are also going to the USA.

Russia has yet to respond to the latest peace overtures, but the Kremlin has stressed that plans to create a European-led, US-backed multinational force for Ukraine will not be accepted.

President Vladimir Putin made his feelings towards Europe clear on Wednesday, saying the continent was in a state of “complete degradation” and that “European piglets” – a derogatory description of Ukraine’s European allies – hope to profit from Russia’s collapse.

The European Commission, the EU’s executive arm, has proposed lending Kiev nearly €90bn (£79bn) from €210bn of Russian assets in Europe over the next two years.

This corresponds to approximately two-thirds of the 137 billion euros that Kiev is thought to need to complete in 2026 and 2027.

Until now, the EU had been giving Ukraine the interest generated by the cash, not the cash itself.

“This is a critical period for Ukraine to continue fighting next year,” a Finnish government official told the BBC. “Of course there are peace negotiations, but this gives Ukraine the power to say ‘we are not helpless and we have the money to continue fighting’.”

Commission president Ursula von der Leyen said this would also increase the cost of war for Russia.

Russia’s frozen assets are not the only option on the table for EU leaders. Another idea supported by Belgium is based on the EU borrowing from international markets, using the EU budget as a guarantee.

But this requires unanimity, and Hungary’s Viktor Orban has made it clear that he will not allow more EU money to help Ukraine.

The coming hours are important for Ukraine and President Volodymyr Zelensky is expected to attend the EU summit.

Ahead of the Brussels meeting, EU leaders were keen to emphasize the crucial nature of the decision.

Von der Leyen told the European Parliament: “We know the urgency. This is a serious situation. We all feel it. We all see it.”

German Chancellor Friedrich Merz played a leading role in pushing for the use of Russian assets, telling the Bundestag on the eve of the summit that this was to send a “clear signal” to Moscow that it was pointless to continue the war.

EU officials are confident they have a solid legal basis to use frozen Russian assets, but the Belgian prime minister is so far unconvinced. Defense minister Theo Francken warned ahead of the talks that handing over cash from Euroclear would be a big mistake.

The biggest opponent of this move seems to be Hungary, and even before the summit, Prime Minister Orban and his entourage claimed that the frozen assets plan was removed from the summit agenda. A European Commission official stressed that this was not the case and that it would be a matter for the top 27 member states.

Slovakia’s Robert Fico also opposed the use of Russian assets if it meant the money was used to procure weapons rather than reconstruction needs.

When the crucial vote finally takes place, it will need to be passed by a majority of around two-thirds of member states. Whatever happens, European Council President António Costa has promised that it will not go over the Belgians’ heads.

“We will not vote against Belgium,” he told Belgian public broadcaster RTBF. “We will continue to work very intensively with the Belgian government because we do not want to approve something that is unacceptable for Belgium.”

Belgium will also know that ratings agency Fitch has placed Euroclear on negative watch due in part to “low” legal risks to its balance sheet arising from the European Commission’s plans to use Russian assets. Euroclear’s CEO also warned against the plan.

The Finnish official said, “Of course, there are many setbacks and obstacles ahead of us. We must find a way to respond to Belgium’s concerns.” he added. “We are on the same side as Belgium. Together we will find solutions to ensure that all risks are controlled as much as they can be.”

But Belgium is not the only country with doubts, and a majority is not guaranteed.

Italian Prime Minister Giorgia Meloni told Italian lawmakers that he would approve the agreement “if it has a solid legal basis.”

“If the legal basis for this initiative were not solid, we would have given Russia its first real victory since the beginning of this conflict.”

Malta, Bulgaria and the Czech Republic are also said to be unconvinced by the controversial proposals.

If the deal is approved and Russian assets are given to Ukraine, the worst-case scenario for Belgium could be a court order to return the money to Russia.

While some countries have said they are ready to provide financial guarantees worth billions of euros, Belgium will want to see these figures added up.

In any case, Commission officials are confident that the only way for Russia to get this back would be to pay compensation to Ukraine; At this point Ukraine will return the “compensation loan” to the EU.