The European Union is examining a “reparations loan” for Ukraine of up to €130 billion, with the eventual size to be set after the International Monetary Fund completes an updated assessment of Kyiv’s financing needs for 2026–27, according to officials involved in the talks.
The proposal, outlined by European Commission President Ursula von der Leyen on 10 September, would advance funds to Ukraine now and require repayment only once Russia pays war reparations under a future peace settlement. Financial risk would be shared by participating EU members and potentially G7 partners. The Commission has not yet tabled legislative text; the instrument remains at the design stage.
The mechanism under discussion seeks to mobilise cash balances stemming from Russian sovereign assets immobilised in the West since 2022. Of roughly €210 billion held in Europe—most at Belgian central securities depository Euroclear—around €175 billion has matured into cash. Officials say this cash, rather than the underlying principal securities, could serve as the base for the new loan. The approach is designed to avoid outright confiscation, a step many EU governments and the European Central Bank have flagged as a legal red line.
Before a new instrument proceeds, EU officials indicate that the bloc aims to retire the €45 billion EU share of the G7’s 2024 “Extraordinary Revenue Acceleration” (ERA) loan package—part of a $50 billion facility backed by proceeds from the frozen Russian assets. That sequencing would leave approximately €130 billion available from Euroclear’s cash balances for a reparations loan.
Current thinking points to a Special Purpose Vehicle (SPV) structure. Under this model, immobilised cash at Euroclear could be transferred to the SPV in exchange for zero-coupon bonds issued by the European Commission and guaranteed by participating EU and potentially G7 states. The bonds would compensate Euroclear for the transferred cash and provide a claims chain intended to protect the depository against litigation, while keeping the principal of Russia’s assets formally untouched. Technical work on this design is ongoing.
The initiative builds on earlier steps to channel “windfall” income from the frozen assets to Ukraine and to leverage that income to service the G7’s ERA loans. EU lawmakers in 2024 also cleared an extraordinary loan facility of up to €35 billion backed by future revenues from the assets, separate from the new reparations-linked concept now advancing.
Member-state positions continue to evolve. Germany signalled on 25 September that it is open to an EU plan to unlock up to €200 billion of frozen Russian funds at Euroclear via an EU-backed bond swap, amid wider debate over Europe’s share of the defence burden and uncertainty about U.S. policy continuity. Some governments remain cautious over legal risk and the precedent of using sovereign assets absent a UN Security Council mandate. Participation by all 27 EU countries is not guaranteed.
Key outstanding questions include the IMF’s updated needs estimate for Ukraine for 2026–27; the scope and terms of EU and possible G7 guarantees; the distribution of risk between participating states; and safeguards if sanctions are lifted before reparations are agreed. Legal services and central bank lawyers are examining compatibility with EU law, property-rights protections, and potential claims by Russia or affected counterparties. Officials stress that the plan targets cash balances generated by maturing assets and does not entail confiscation of principal.
The proposal would complement, rather than replace, the existing G7 ERA structure under which Western governments lent $50 billion in 2024, serviced by future interest income on the immobilised assets. In the event sanctions end prematurely, ERA risk remains with lenders, not Ukraine—an allocation designed to ensure continuity of support.
Timing will depend on the IMF’s review, legal vetting and coalition-building among EU capitals. The Commission has indicated that detailed parameters—size, maturity profile, guarantee coverage and the SPV’s governance—will be settled only after those steps. For now, the working figure of “up to €130 billion” reflects the remaining Euroclear cash once the ERA-related obligations are met.
EU weighs ‘reparations loan’ for Ukraine backed by frozen Russian assets’ cash balances
