European Union finance ministers have given their political backing to a proposed “reparations loan” for Ukraine that would be underpinned by immobilised Russian central bank assets, calling it the most effective of three options to secure multi-year support for Kyiv.
Meeting in Brussels on Thursday, ministers signalled broad support for a European Commission plan that would raise up to €140 billion for Ukraine in 2026 and 2027 without adding to member states’ national debt. The scheme is intended to provide predictable funding for Ukraine’s budget and defence.
Commission President Ursula von der Leyen set out the choices earlier in the day in a speech to the European Parliament. She said the EU could borrow against the “headroom” of its long-term budget, individual member states could borrow nationally and pass the money on to Ukraine as grants, or the Union could create a loan backed by Russian central bank assets frozen in Europe, which would in practice function as a grant.
Under the preferred design, the EU would not confiscate the Russian assets. Instead, cash held in accounts at Euroclear, the Belgian securities depository where most of the Russian central bank’s funds in Europe are parked, would be replaced with zero-coupon AAA-rated bonds issued by the European Commission. The cash released in this way would then be transferred to Ukraine.
Ukraine would be required to repay the loan only if it receives war reparations from Russia at a future date, leading EU officials to refer to the scheme as a Reparations Loan. In the absence of reparations, the loan would effectively become a grant. The EU already uses windfall profits from the frozen assets to back a G7-led loan package for Ukraine; the new proposal would go further by using the cash balances themselves as collateral, while leaving legal ownership with the Russian central bank.
Danish economy minister Stephanie Lose, who chaired the Brussels meeting, told reporters that ministers saw the Commission blueprint as the most promising of the three choices. “The Commission’s proposal is the best and most realistic option and should be treated as a matter of highest priority,” she said. Finnish finance minister Riikka Purra said it was the only approach that combined “sufficient firepower” with limited pressure on national budgets.
Belgium has emerged as the main source of reservations. Because Euroclear is domiciled in Belgium and holds the bulk of the frozen Russian central bank assets, the government in Brussels is concerned it could be held liable if Russian authorities or related entities successfully challenge the scheme in court. Belgium has asked for legal guarantees, including a commitment that other EU governments would provide the funds to reimburse Russia if a court ever ordered the assets to be returned, and has urged other member states that host frozen Russian assets to join the arrangement.
The European Commission is working with Belgian officials to address these concerns. EU leaders are expected to take up the issue at their December summit, with capitals under pressure to agree a package in time for disbursements to begin early in 2026. Without a decision on long-term EU financing, Ukraine faces uncertainty over how it will cover its budget and defence needs once existing support programmes expire.
Moscow has condemned the plan, arguing that it amounts to an unlawful expropriation of Russian state property and warning of retaliation if the EU proceeds. European officials counter that the proposal does not alter legal title to the assets, which would remain frozen until Russia pays compensation for the damage caused by its invasion of Ukraine, and say the Union is acting within the framework of its sanctions regime.
Since 2022 the EU and G7 partners have frozen large Russian central bank reserves, many of them held at Euroclear. As the underlying securities have matured, they have turned into cash, generating interest income earmarked for Ukraine. The reparations loan would shift from using only this income to leveraging the cash itself to bring forward much larger sums.
Thursday’s discussion among finance ministers did not produce a formal legal proposal, but it confirmed that a majority of governments see the reparations loan as the centrepiece of the EU’s next support package for Ukraine, pending detailed work on the legal basis and risk-sharing arrangements.
