EU Plans to Utilize Frozen Russian Assets for Ukrainian Support
European leaders aim to endorse controversial plans to use Russian frozen assets to support Ukraine at a meeting in Brussels on Thursday.
The unprecedented proposal for what the EU has dubbed a reparations loan would see Kyiv receive €140bn (£121bn) worth of frozen Russian state assets currently held by Euroclear, a Belgium-based financial institution.
The plan has been months in the making, partly due to the legal complexities surrounding it, as well as concerns from member states about upsetting global financial stability.
Belgium in particular has been reluctant to back using the frozen assets, as it is nervous about having to shoulder any potential consequences should Russia legally challenge Euroclear.
Russia has reacted angrily to any suggestions that the EU could use its money.
How would a reparations loan work?
For the EU, the problem of how to continue to support Kyiv's struggle against Russian aggression has become more urgent since US support for Ukraine has dwindled.
As of July, EU member states have provided about €177.5bn (£154bn) in financial support for Ukraine. But in the absence of any progress towards a ceasefire deal, Ukraine will need more money as Russia's full-scale war approaches its fifth year.
The price tag of Ukraine's reconstruction and recovery is estimated by the UN and World Bank at well above $486bn (£365bn; €420bn).
About €210bn (£182bn) in Russian investments was frozen by the EU when Moscow launched its full-scale invasion in February 2022.
The biggest share – some €185bn – is sitting in Euroclear, a clearing house for financial transactions in Brussels which operates under EU jurisdiction.
When they were first frozen, the majority of these Russian investments were in the form of sovereign bonds.
The EU has been using the interest from Russian frozen assets for Ukraine's defense since spring 2024, amounting to up to €3bn per year.
The EU is now considering redirecting the frozen funds themselves to Ukraine as a zero-interest reparations loan.
Can EU get around legal issues over Russia's cash?
International law stipulates that sovereign assets cannot be confiscated outright. To get around this issue, the EU could borrow Russia's frozen money held by Euroclear and replace it with an IOU backed by all member states underwriting the debt.
On Thursday morning Belgium was still expressing criticism of the proposal but leaving the door open to it, if it received guarantees that the risk would be shared by all member states.
Russia is furious with the idea of its investments being used.
What are the issues?
The most glaring issue with the reparations loan scenario is that it hinges on Ukraine winning the war and Russia accepting to pay damages.
Poland, Scandinavian, and Baltic countries have enthusiastically endorsed the plan, while leaders from Hungary and Slovakia may oppose it, highlighting the internal divisions within the EU on this issue.
Who backs the plan, and who doesn't?
Germany is supportive but emphasizes that funds should be used to finance Ukraine's military equipment, indicating a significant division on the intended use of the loan among EU nations.
