EU’s Ukraine funding deal keeps Kyiv in fight, Russian assets in deep freeze
The agreement has the advantage of being simple. The EU will borrow from financial markets in exchange for the EU budget, and cash will quickly flow to Kiev. This sends a message to Russian President Vladimir Putin that the bloc can emerge as a geopolitical actor.
But it also damaged the reputation of powerful EU figures such as German Chancellor Friedrich Merz and European Commission President Ursula von der Leyen, who advocated for a bolder and more complex “reparations loan” financed by Russian assets frozen in the EU.
Michael Carpenter, former senior director for Europe at the US National Security Council, said on X: “It’s much better than no package, but at the end of the day, the EU looked at Russia and blinked. Fear trumped reason.”
Intense pressure to reach agreement
Leaders who met at the summit in Brussels, which started on Thursday and lasted until the early hours of Friday, were under intense pressure to reach a deal to finance Kiev.
President Donald Trump has cut off U.S.-funded military aid to Ukraine and recently called European leaders weak. President Volodymyr Zelenskiy himself warned leaders that if they did not deliver, Ukraine would run out of funds within a few months, which would cripple the war effort.
But the compensation loan proposal has faced strong resistance from Belgium, which hosts the bulk of the 210 billion euros of Russian assets in the EU. Proponents of the project failed to win over Belgium and others, handing over a central role to Hungary’s Moscow-friendly, Trump-supporting Prime Minister Viktor Orban. Orban had said weeks ago that he would not support an EU-financed loan to Ukraine that would require unanimity among the bloc’s 27 members. But he was also strongly against using Russia’s frozen assets.
He paved the way for the agreement by announcing at the summit that he would support an EU-backed loan as long as it did not affect his country financially.
The agreement came at the end of what some diplomats saw as a challenging week for the EU’s geopolitical ambitions; as the agreement also included attempts to finalize a trade agreement with South America’s Mercosur bloc.
The EU’s results were mixed here too. Von der Leyen had to abandon plans to travel to Brazil for the signing ceremony on Saturday after Italian Prime Minister Giorgia Meloni said she needed more time before signing. However, EU leaders expressed confidence that the agreement would be signed within a few weeks.
Orban announced that the compensation loan has ended
Although some leaders insisted they would continue working on the compensation credit, Orban told reporters after the summit that the idea was “dead”. He also emphasized that Hungary, Slovakia and the Czech Republic received exemptions from the financial costs of the new plan.
Other EU leaders said the frozen Russian assets could later be used to repay the loan. But any attempt to do so would likely revive many of the same contentious legal and political debates surrounding the idea of compensation credit.
Still, the EU’s decision ahead of the summit to freeze assets indefinitely means those assets will not return to Russia without the bloc’s agreement, giving Europe a valuable advantage in ongoing US-led peace talks.
The 28-item draft US peace plan prepared last month proposed that $100 billion of the frozen funds be invested in US-led efforts to rebuild Ukraine, with the US receiving 50% of the profits.
Early Friday morning, Merz, von der Leyen and other leaders rushed to praise the EU’s borrowing plan; They stated that this outcome, which they had previously stated clearly, was not their preferred option.
“I am very happy that we were able to unanimously take this decision today, after intense deliberations. This way we can resort to tested and proven European tools and provide immediate support to Ukraine without further delay,” Merz said. he said.
Not everyone was impressed. “We have moved from saving Ukraine to at least saving the reputation of those pushing for the use of frozen assets,” an EU diplomat said.
