The European Commission has proposed a new instrument to finance Ukraine’s defence and budgetary needs by leveraging the cash balances generated by Russian state assets immobilised in the European Union.
Commission President Ursula von der Leyen told the European Parliament in Strasbourg on Wednesday, 10 September, that the principal of those assets would remain untouched, while any financial risk would be shared by EU member states. She described the concept as a “Reparations Loan” that Ukraine would repay only once Russia pays war reparations.
Von der Leyen did not indicate a target size for the facility or a timetable. Her signal comes as the Group of Seven advances a separate, already-agreed $50 billion loan for Ukraine that will be serviced by the future profits generated from roughly $300 billion in frozen Russian sovereign assets across G7 jurisdictions. The EU idea would build on this approach by using cash balances linked to the assets, without seizing the underlying capital.
The legal distinction is central. Since early 2024, the EU has framed support for Kyiv around “extraordinary revenues” arising from immobilised assets rather than confiscation, which carries higher litigation and systemic-risk exposure. In May 2024, EU governments approved the use of the net windfall profits accruing to European central securities depositories for military support and reconstruction, a channel that has already delivered funding for Ukraine. The proposed loan would stay within the same legal logic by relying on proceeds, not principal.
Disbursements from the windfall-profits mechanism have become recurrent. The EU transferred an initial €1.5 billion to Ukraine in mid-2024, followed by further tranches in 2025, including about €1.6 billion received in early August to cover loan repayments. These flows demonstrate that the proceeds-based model can yield predictable support, albeit at a scale below Kyiv’s needs; the Commission’s new proposal is aimed at front-loading additional resources while preserving legal safeguards.
Member-state risk sharing is likely to be decisive. Belgium, home to Euroclear—where around €190 billion of Russian central bank assets are held—has signalled conditional openness to more assertive revenue-generation strategies provided the legal risks are collectively borne and the core assets remain intact. Brussels has also cautioned against outright confiscation on market-confidence grounds. Von der Leyen’s call for collective risk mirrors these concerns and could help align national positions behind a single EU structure.
Internationally, the EU move would sit alongside the G7’s Extraordinary Revenue Acceleration loans. The United States announced a $20 billion tranche in December 2024 under that scheme, with repayment to come from profits on immobilised Russian assets. The Commission’s “reparations loan” would differ in that Ukraine’s obligation to repay would be triggered only once Russia pays reparations, creating a contingent claim rather than a conventional sovereign liability serviced from domestic revenues.
Key design questions remain. The Commission has not specified whether the loan would be issued by the EU budget, a special-purpose vehicle, or the European Investment Bank; nor has it detailed how cash balances would be segregated, how losses would be allocated, or how the instrument would interact with existing EU support lines such as the European Peace Facility and macro-financial assistance. Legal scholars and market practitioners have, however, outlined options ranging from “bad bank”-style structures to SPVs that warehouse proceeds while insulating underlying assets from seizure claims.
Next steps will hinge on technical drafting and political consensus. Any proposal that implies shared liabilities or use of EU budget guarantees typically requires Council and Parliament approval. By keeping the principal intact and focusing on proceeds and cash balances, the Commission is attempting to increase near-term funding for Kyiv while reducing legal exposure and maintaining leverage over Moscow for a future settlement. The Parliament heard no timeline today, but the signal from Strasbourg indicates a push to convert proceeds from immobilised Russian assets into larger, front-loaded support.
