EU finance ministers agree using frozen Russian assets most effective way to fund Ukraine

By Bart H. Meijer and Lili Bayer

European Union finance ministers agreed on Thursday that funding Ukraine with a reparations loan based on immobilised Russian assets would be the most "effective" of three options being considered by the European Union to help Kyiv.

Earlier on Thursday, European Commission President Ursula von der Leyen told the European Parliament that the EU could either borrow the money needed to cover Kyiv's needs in 2026 and 2027 against the collateral of its long-term budget, or each EU country could borrow on its own and extend a grant to Ukraine.

The third option was a proposal from the Commission to organise a loan that would effectively become a grant, on the basis of the Russian central bank assets frozen in the EU.

"The Commission's proposal is the best and most realistic option and should be treated as a matter of highest priority," Danish Economy Minister Stephanie Lose, who chaired the ministers' talks, told a news conference after the ministerial discussions.

OPTION IS BROADLY SUPPORTED BY MEMBER STATES

Using the frozen Russian assets is attractive to EU finance ministers because it does not increase their own countries' debt and yet would provide Ukraine with up to 140 billion euros ($163.3 billion) over two years, covering Kyiv's estimated needs.

Most of the Russian assets frozen in Europe are on the accounts of Belgian securities depository Euroclear. Since Moscow's invasion of Ukraine in February 2022, almost all of the securities have matured and become cash.

The frozen assets option would involve the EU replacing the Russian cash on Euroclear accounts with zero-coupon AAA bonds issued by the European Commission.

The cash would then go to Kyiv, which would only repay the loan if it gets war reparations from Russia, effectively making the loan a grant. The option is called the Reparations Loan, because it would be linked to Russia paying reparations.

"It is the only option that has both sufficient firepower and limits the strain on our national budgets," Finnish Finance Minister Riikka Purra said.

But Belgium, which is home to Euroclear, believes it could be liable in the event of a successful Russian lawsuit against the company and wants EU governments to pledge they would come up with the necessary cash to repay Moscow within three days if a court ever decided that the assets must be returned.

The Kremlin has said the proposal would represent an illegal seizure of Russian property and has said it would retaliate, without elaborating.

Belgium therefore also wants the Commission to produce a solid legal base for the whole operation to minimise the risk of a lost lawsuit and has asked other EU countries that hold frozen Russian assets to join the scheme to spread responsibility.

The Commission is now in talks with Belgium to address its demands with a view to securing support of EU leaders for the plan in December.