European Union leaders meeting in Brussels on Thursday 18 December are weighing whether to turn the profits from immobilised Russian sovereign assets into long-term financial support for Ukraine, a mechanism widely discussed in the bloc as a “reparations loan”.
The assets, frozen after Russia’s full-scale invasion in February 2022, are largely held in Belgium through the Brussels-based securities depository Euroclear.
Ukraine’s leadership has pressed for a decision that would provide predictable funding across 2026 and 2027, at a time when Kyiv’s domestic revenues remain insufficient to cover both defence costs and core state spending. In his nightly address on Wednesday 17 December, President Volodymyr Zelenskyy told allies that the summit’s outcome should leave Moscow believing the war would be “pointless” to continue into next year because Ukraine would have support. He urged partners to take a decision on using nearly $250 billion in frozen Russian sovereign assets in the EU to finance assistance to Kyiv.
The proposal under discussion focuses on the proceeds generated by the frozen holdings rather than the principal itself. EU governments recently agreed to keep the assets immobilised for as long as needed, moving away from the previous cycle of rolling sanctions over at regular intervals. That shift was designed to reduce uncertainty around any financing plan built on the continued immobilisation of Russian reserves.
The immediate political obstacle lies in risk allocation. Belgium has argued that, because most of the assets sit in its jurisdiction, it faces outsized legal and financial exposure if Russia were to mount successful litigation against Belgium or Euroclear. Belgian leaders have sought stronger guarantees from the rest of the bloc before signing off on a structure that could leave Belgium carrying liabilities alone.
Legal concerns are not confined to Belgium. Italy’s prime minister, Giorgia Meloni, said this week that using frozen Russian assets to support Ukraine was legally complex and required a strong basis that would not create long-term liabilities for national budgets. Her comments reflect a broader caution among some member states that a precedent-setting instrument could invite countermeasures or prolonged court disputes.
For Ukraine, the debate is anchored in a funding gap that remains large even with ongoing foreign support. The International Monetary Fund estimates Ukraine will need about €135 billion in 2026 and 2027. Kyiv’s budget plans for 2026 set spending at 4.8 trillion hryvnias (about $112 billion) against revenues of 2.9 trillion hryvnias, implying a deficit of roughly 1.9 trillion hryvnias, or about 18.5 per cent of GDP. Finance Minister Serhiy Marchenko has said Ukraine would need more than $45 billion in external financing in 2026, while parliamentary budget committee head Roksolana Pidlasa has said the government still needs to secure $18–20 billion to cover the 2026 gap.
Defence dominates those totals. Ukraine plans to spend 2.8 trillion hryvnias in 2026 on defence, described by officials as around 27.2 per cent of GDP. The front line runs more than 1,200 kilometres across the east and south, and Ukraine has about one million people in its defence forces. Officials have estimated the daily cost of fighting in 2025 at $172 million, up from $140 million a year earlier.
The central question is not whether Ukraine can keep paying for the war in early 2026, but whether it can avoid a mid-year funding squeeze if EU decisions drag on. Pidlasa has said Ukraine could manage with its own resources in the first quarter of 2026, but that an early EU approval would be crucial to begin disbursements soon afterwards. She has also linked the EU decision to broader financing: Ukraine has secured preliminary IMF approval for a new four-year $8.2 billion programme, with final approval depending on a positive decision on the EU loan.
EU diplomats argue that a loan backed by asset proceeds is one of the few options capable of providing large-scale support without immediate pressure on national debt metrics. The bloc is discussing a plan that could mobilise tens of billions of euros for 2026–27. EU officials fear Ukraine could run short of funds by mid-2026 without additional backing.
Zelenskyy framed his appeal as a signal to Moscow that Ukraine’s partners intend to sustain support into 2026. In Moscow, President Vladimir Putin said Russia would take more land in Ukraine by force unless Kyiv and European leaders engaged with U.S. peace proposals, highlighting the distance between negotiation talk and battlefield intent.
If the EU cannot finalise a workable risk-sharing arrangement, Ukraine still has alternatives, but each carries trade-offs: higher domestic borrowing, fiscal tightening in non-defence areas, or additional bilateral packages negotiated country by country. The EU’s decision, however, would affect more than one line item. It would shape Kyiv’s budget planning for 2026–27, influence IMF financing assurances, and test whether the bloc can convert a sanctions instrument into sustained financial support while managing legal exposure across member states.
