EU proposes using frozen Russian assets or borrowing to give Ukraine $136b

Summary

• EU proposes using frozen Russian assets or borrowing to raise €90 billion for Ukraine, covering two-thirds of its financing needs.
• Belgium is wary, demanding guarantees from EU partners to cover potential legal costs and Russian retaliation related to the plan.
• Von der Leyen says the US reacted positively, while Russia warns the EU that using its assets would be considered theft.

BRUSSELS - The European Commission proposed on Dec 3 an unprecedented use of frozen Russian assets or international borrowing to raise €90 billion (S$36 billion) for Ukraine to cover its struggling military and basic services against Russia’s war.

The European Union’s executive body has declared it favours a “reparations loan” using Russian state assets immobilised in the EU due to Russia’s invasion of Ukraine.

But Belgium, which holds most of the assets and has voiced a range of legal concerns, is not convinced by the proposal.

“We are proposing to cover two-thirds of Ukraine’s financing needs for the next two years. That’s €90 billion. The remainder would be for international partners to cover,” Commission president Ursula von der Leyen told reporters.

“Since pressure is the only language the Kremlin responds to, we can also dial it up,” she said.

“We have to increase the costs of war for (Russian President Vladimir) Putin’s aggression and today’s proposal gives us the means to do this.”

She said the proposal to EU member states had taken into account almost all the concerns raised by Belgium, whose Brussels-based financial institution Euroclear is the main holder of the assets.

The Belgian government does not “share that assessment”, a senior official told Reuters.

“Belgium cannot accept being asked to bear the risks of such an operation alone.”

The proposal would now also cover other financial institutions in the EU that hold Russian assets, Dr von der Leyen said.

EU officials said France, Germany, Sweden and Cyprus also hold such assets.

Russia has warned the EU and Belgium against using its assets, which it says would be an act of theft. The Commission says the scheme does not amount to confiscation as the money would be in the form of a loan - although Ukraine would only have to redeem it if Russia pays reparations.

The complexities shrouding the scheme increased after a US-backed 28-point plan to end the war in Ukraine proposed that some of the assets be used in a joint American-Russian investment vehicle.

But Dr von der Leyen said she had informed US Treasury Secretary Scott Bessent of her plan to move forward with the reparations loan and it had been “positively received”.

Economy Commissioner Valdis Dombrovskis said the EU was also seeking to persuade other international partners to provide support in the first quarter of 2026 as the EU money would probably not be available until the second quarter.

The Commission said the EU could proceed with the scheme if 15 out of 27 member countries, representing at least 65 per cent of the bloc’s population, voted in favour.

EU officials said this would also ensure Russia’s sanctioned assets remain immobilised, an essential part of the reparations loans, under EU law allowing financial assistance in instances of “severe difficulties”.

The other option - borrowing on international markets using the EU budget - would also normally require unanimity among EU countries - a potentially difficult hurdle as Hungary’s Russia-friendly government has opposed previous funding for Ukraine.

Belgium demands guarantees from EU partners

European Central Bank president Christine Lagarde told a European Parliament hearing that using a reparations loan would be a stretch, legally and financially, though it would “hopefully” respect international law and financial stability.

The senior Belgian official, however, said: “Compensation for unlawful expropriation can far exceed the value of the assets and include compound interest and lost opportunities.”

The proposal does not provide “an unconditional right for Euroclear to claim compensation in any situation where it has to pay the Central Bank of Russia, or would be exposed to Russian retaliation,” the official added.

Hours earlier, before the Commission’s legal proposals were presented, Belgian Foreign Minister Maxime Prevot declared that they fell short of Belgium’s requirements.

The issue is likely to come to a head at an EU leaders summit on Dec 18, when the Commission said it hoped to clinch a firm commitment by member states.

Belgium has demanded that other EU countries guarantee
they will cover all legal costs arising from any Russian lawsuits against the scheme. It also wants them to guarantee they would help provide money quickly to pay Russia back if a court ever ruled Moscow must be refunded. REUTERS