European Commission plans ‘reparations loan’ to Ukraine using frozen Russian assets | European Union

The European Commission will move forward with controversial plans to fund Ukraine with a loan based on Russian frozen assets, but in a concession to concerns raised by Belgium, home to most of the assets, the EU executive has also proposed another option: an EU loan based on joint borrowing.

European Commission President Ursula von der Leyen said on Wednesday that the two proposals “will ensure that Ukraine has the means to defend itself.” [itself] and to advance peace negotiations from a position of strength.”

The latest round of US-Russia talks aimed at ending the conflict appears to have made little progress. The talks were “positive” but there was little sign that Putin was ready to compromise on his maximalist goals, a Kremlin official said Wednesday, the day after talks between Vladimir Putin and Donald Trump’s envoys Steve Witkoff and Jared Kushner.

Ukrainian foreign minister Andrii Sybiha called on Putin to “stop wasting the world’s time.” His Estonian counterpart, Margus Tsahkna, said it was “quite clear” that the Kremlin was not interested in peace. “What we’re seeing is that Putin hasn’t changed course at all. He’s moving more aggressively on the battlefield,” he said.

Outside of the White House effort to implement the peace deal, European leaders have focused on the need to close the gap in Ukraine’s finances as the war enters its fourth winter.

Von der Leyen outlined a €90 billion plan that she estimates will cover two-thirds of Kyiv’s financing needs for the next two years. He said other “international partners” would do the rest.

The aid would be financed by joint EU borrowing or a loan based on Russia’s frozen assets in Europe. EU officials say the two options can be combined, but they have always made clear that a frozen asset loan is their preferred option, despite fierce opposition from Belgium, home to much of Russia’s dormant wealth.

EU leaders at this month’s EU summit will be invited to agree on a two-year financing plan to avoid Ukraine’s looming cash crunch, following the publication on Wednesday of the long-awaited legal text on the compensation loan.

Leaders failed in October to agree on a proposed “compensation loan” to Ukraine using Russian assets, but the question is increasingly pressing with predictions that Kiev will run out of money starting next spring. EU officials estimate Ukraine needs €136bn (£119bn) in 2026 and 2027 to maintain its defense and keep the country afloat.

Risks rose further after the Trump administration announced a plan to invest some of Russia’s frozen assets in joint US-Russia projects and profit from a $100bn (£75bn) fund it has set aside for the reconstruction of Ukraine. European leaders strongly opposed these ideas, which were part of a later amended 28-point plan for Ukraine.

About €290 billion of Russia’s sovereign wealth in the west is frozen after a full-scale invasion of Ukraine in 2022. Most of these funds are held in Europe, especially Belgium. Euroclear, the central securities depository in Brussels, holds €183 billion of Russian assets and fears that any use of the assets could amount to confiscation, violating international law and triggering a barrage of legal cases.

EU officials have always downplayed the legal risks, arguing that Russia will retain ownership of the funds. They are offering Ukraine an EU loan secured by Russian assets. The plan is based on the assumption that Moscow will one day pay compensation to Kiev and that Russia’s assets will be frozen for the foreseeable future.

Von der Leyen said on Wednesday that the compensation loan would have “strong safeguards for our member states” in response to Belgian prime minister Bart De Wever saying Belgium could face a bill worth billions of euros if Euroclear is sued by Russian individuals and companies.

The commission chairman rejected his claim that using frozen assets would hinder any peace agreement. De Wever said the compensation loan plan was “fundamentally wrong” and would pose an obstacle to any peace agreement because frozen assets could not be used to rebuild Ukraine.

Von der Leyen said: “We are increasing the cost of Russia’s war of aggression, and this should serve as an additional incentive for Russia to join the negotiating table.”

Belgian foreign minister Maxime Prévot said his government continued to view the compensation loan as their “worst of the worst” option. Arriving at the NATO ministerial meeting in Brussels, he said: “The text that the Commission will table today does not address our concerns satisfactorily. It is unacceptable to use money and expose us to risks.”

He also said he was annoyed that Belgium was “not being heard” and that its concerns were being “ignored”.

In theory, Belgium could be left behind in the frozen assets plan, which is strongly supported by Germany and the Scandinavian and central and eastern European member states. In reality, EU countries would be extremely reluctant to isolate Brussels, but the Belgian government would face pressure to do so.

Von der Leyen said the EU had taken into account almost all of Belgium’s concerns. He insisted that the proposal “contains very strong measures to protect member states and reduce risks as much as possible”.

These safeguards include guarantees from other member states and the EU if Belgium has to repay any money, as well as protection against “illegal expropriations outside Russia”, a reference to legal challenges in countries friendly to Moscow.

The EU will also develop legislation supporting asset freezing to ensure it is not accidentally “unraveled” by an EU member state’s veto. Currently, EU sanctions must be renewed every six months by unanimous consent, including from Hungary’s Kremlin-friendly government.

Belgium would welcome the commission’s proposal for the EU loan option for Ukraine, which uses unallocated funds in the EU budget as collateral, preferred by Brussels. Belgium says this is the least risky way to fund Ukraine, but many EU governments are reluctant to risk more widespread borrowing.

EU foreign policy chief Kaja Kallas, a strong proponent of the frozen asset plan, said this week that “raising capital together is also out of the question for some member states”. He argued that he did not want to “reduce the risks or concerns of the Belgian government” but that a loan based on Russian assets was the best option and would “certainly strengthen Europe’s position vis-à-vis Moscow.”

Additional reporting by Jakub Krupa