The European Commission is developing a new financial instrument to support Ukraine in its fight against Russian aggression—a reparations loan based on revenues from frozen Russian assets. This was announced by a European Commission official during a briefing in Brussels.
This is reported by Finway
Ukraine’s Needs and Sources of Funding
According to estimates from the International Monetary Fund, Ukraine will require approximately 52 billion euros in budgetary assistance in 2026–2027. It is important to note that this amount does not account for additional needs in the defense sector. The official emphasized that depending on the situation on the front lines, this amount could rise to 80 billion euros over the next two years. He stressed that a refusal to provide support could lead to critical consequences for the Ukrainian state and pose a serious threat to European security.
“Thus, the amounts are quite significant, and depending on the forecast regarding hostilities, they could easily increase to about 80 billion over the next two years… Failure to provide support will most likely lead to the collapse of Ukraine, which we believe would pose a serious threat to the security of Europe,” the European Commission official emphasized.
Mechanism for Reparations Loan and the Role of Frozen Assets
According to the official, the EU cannot rely on substantial financial assistance from the United States, making the use of frozen Russian assets increasingly relevant. They plan to utilize these assets while adhering to international law and without resorting to confiscation.
The EU is expected to borrow funds from the Euroclear depository, which has accumulated about 176 billion euros from bonds of the Russian Central Bank. The main idea is for these funds to be invested in the European Central Bank and then directed as a loan to Ukraine. The repayment of the debt by Ukraine is only anticipated after Russia compensates for the damages caused.
The European Council agreed in October 2024 that Russian assets will remain frozen as long as the aggression continues and until Russia compensates for the damages. This minimizes risks for the EU’s financial system and eliminates the need for additional guarantees from member states. If Russia fails to pay reparations, the assets will remain frozen. Only if EU countries voluntarily decide to unblock the assets before the conditions are met will there be a need for guarantees, but this is purely a political decision.
Currently, the European Commission is consulting with member states regarding the final format of the reparations loan. A specific proposal is expected to be prepared following the EU leaders’ summit at the end of October.
This mechanism has not been applied before due to the complexity of legal and political decisions. To maintain the frozen assets in this status, EU sanctions will be extended every six months by a qualified majority.
The loan idea involves the EU entering into a separate debt contract with Euroclear at 0% interest. In the event that Ukraine receives reparations from Russia, it will repay the loan to the EU, and the EU will repay the depository, after which the money will return to Russia. The Kremlin has already labeled this initiative as “pure theft.”
At the same time, the Kremlin is responding to such measures: on September 30, Vladimir Putin signed a decree on a new procedure for the sale of federal assets. According to Bloomberg reports, Russia is considering nationalization and rapid liquidation of foreign assets in response to the potential seizure of its funds abroad.