EU Eyes €140 Billion Ukraine Loan Using Frozen Russian Assets Amid Legal Hurdles
European Union leaders have expressed cautious support for a bold and unprecedented plan: using frozen Russian central bank assets to finance a €140 billion loan to Ukraine. While there is growing political momentum behind the idea, significant legal and financial hurdles remain.
The proposal, spearheaded by the European Commission, comes at a critical time. With U.S. military aid to Ukraine drying up and EU member states facing their own fiscal constraints, the bloc is searching for alternative means to sustain Ukraine’s defense and government operations through 2026 and 2027. The proposed loan would be backed not by EU taxpayers directly, but by profits generated from Russian sovereign assets frozen in the West since Moscow's 2022 invasion of Ukraine.
Yet the complexity of the plan lies not in its financial mechanics, but in its legal and geopolitical implications.
The Legal Quagmire: Sovereign Immunity and International Law
Under international law, sovereign assets—such as those held by a central bank—are generally immune from confiscation. This principle is designed to protect state property from being seized in foreign jurisdictions. As a result, European leaders are walking a legal tightrope. While they seek to leverage Russian assets for Ukraine’s benefit, they must avoid actions that could be construed as outright expropriation.
European Commission President Ursula von der Leyen attempted to thread this needle by emphasizing that the EU is not confiscating the assets but rather reinvesting profits earned from them. “We have to increase the pressure on Russia. We are not confiscating the assets, but the perpetrator has to be held accountable,” she told reporters.
To avoid violating international norms, the proposal envisions using the interest and profits generated from the frozen assets—estimated to be in the billions—as collateral or a revenue stream for the loan. The assets themselves would remain untouched, at least formally.
A Loan Today, Reparations Tomorrow
Under the proposed plan, Ukraine would receive a €140 billion loan now and begin repayment only after Russia pays reparations for war damages—if and when that happens. This timeline allows Ukraine immediate access to much-needed resources without placing additional debt burdens on its current economy.
"This allows Ukraine to use the money now, rather than wait until Moscow pays up," said Danish Prime Minister Mette Frederiksen, voicing support while acknowledging legal complications. “The whole idea of using frozen assets is good. Of course, there are legal issues to look at.”
Belgium, France, and Luxembourg: Guarded Support
The bulk of the frozen Russian assets are held in Belgium, primarily by Euroclear, a major financial clearing house. Unsurprisingly, Belgian leaders have been the most cautious, demanding strong EU-wide guarantees that they won’t be left to deal with Moscow unilaterally if the assets must eventually be returned.
France and Luxembourg, which also host significant financial institutions, share this concern. French President Emmanuel Macron stated, “When assets are frozen, one has to respect international law. This is what the Belgian Prime Minister also recalled.”
Indeed, for countries holding Russian reserves, the risk is not just legal—it’s diplomatic and economic. If the assets are returned due to an international ruling or peace settlement, and have already been used to back a loan, those countries could face costly liabilities.
Military Procurement and Industrial Interests
Beyond legal debates, the plan also raises questions about who benefits economically from Ukraine’s use of the funds. France, for instance, has made it clear that Ukraine should not spend all the loaned money on U.S.-made weapons, but rather invest in European defense systems. Countries like Germany and Italy, which have robust arms industries, are also lobbying for their share of the procurement.
A French official said Paris is open to the idea but wants other G7 nations—such as the U.S., Canada, Japan, and the U.K.—to also participate in guaranteeing the loan. “Europe should not bear this burden alone,” the official added, noting that a G7 finance ministers' teleconference was scheduled to discuss joint participation.
Mixed Reactions Across the EU
While several EU leaders voiced support in principle, others were more hesitant.
Swedish Prime Minister Ulf Kristersson called the idea "very promising" and said Sweden was “very much in favour.” Dutch Prime Minister Dick Schoof also appeared open, stating that the proposal should be “seriously considered” provided that legal and financial risks are mitigated.
But others urged caution. Luxembourg Prime Minister Luc Frieden warned, “You can't just take over assets that belong to another state so easily. Among other things, how would such a loan be repaid? What would happen if Russia did not repay these reparations in a peace treaty?”
The skepticism underscores the delicate nature of the issue. Although many EU members are politically aligned on supporting Ukraine, not all are ready to take on the financial and legal risk such a plan entails.
Geopolitical and Legal Precedent
Should the EU move forward with this initiative, it would set a precedent with far-reaching consequences. It could open the door to similar actions in future conflicts and may influence how sovereign immunity is interpreted in the context of aggression and war crimes.
Russia, unsurprisingly, has condemned the proposal as “pure theft.” The Kremlin maintains that any use of its assets violates its sovereign rights and is likely to retaliate diplomatically or even legally, possibly by seizing Western assets within its own borders.
What’s Next?
German Chancellor Friedrich Merz said last week he expects EU leaders to give the Commission a mandate to develop a detailed proposal by the next summit on October 23–24. However, EU foreign policy chief Kaja Kallas admitted that reaching a consensus may take time.
“Not all member states are there, it's not supported by everybody yet. We still have a lot of work to do,” Kallas said. “I can't set a deadline, we are trying to do it as fast as possible.”
In the meantime, the debate highlights the EU’s evolving role in global security, finance, and diplomacy. With the war in Ukraine grinding on, and U.S. support increasingly uncertain, Europe may be forced to shoulder more of the burden—and make tough legal and financial choices along the way.
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EU Eyes €140 Billion Ukraine Loan Using Frozen Russian Assets Amid Legal Hurdles
Article:
COPENHAGEN, Oct 1 (Reuters) — European leaders have voiced cautious support for a bold European Commission proposal to use profits from frozen Russian central bank assets to fund a €140 billion loan for Ukraine. The funds would help Ukraine sustain government operations and military efforts through 2026 and 2027, at a time when U.S. aid is uncertain and many EU member states are struggling with fiscal constraints.
While the plan marks a significant geopolitical and financial move, EU leaders acknowledged on Wednesday that serious legal questions must be resolved before the proposal can move forward.
“The whole idea of using frozen assets I think is a good idea,” said Danish Prime Minister Mette Frederiksen as she arrived at a meeting of EU leaders in Copenhagen. “Of course, there are legal issues to look at.”
The proposed scheme would not involve the outright confiscation of Russia’s central bank assets, which are protected under international law. Instead, the EU would use interest and profits generated from the roughly €200 billion in frozen Russian reserves—most of which are held in European institutions—as backing for the loan.
Ukraine would only be required to repay the loan once Russia pays reparations for its 2022 invasion. Until then, the loan would effectively be serviced by revenue from the frozen assets.
Legal Tightrope: Using Without Confiscating
International law, particularly the doctrine of sovereign immunity, restricts countries from seizing another state’s central bank assets. While the assets were legally frozen in response to Russia’s invasion, converting them into direct funding for a third party—Ukraine—could breach international norms unless carefully structured.
European Commission President Ursula von der Leyen sought to reassure critics by stressing that the EU would not directly seize the assets.
“We are not confiscating the assets, but the perpetrator has to be held accountable,” she told reporters. “We believe we have found a legally sound way to make the loan happen.”
Nonetheless, Belgium, which hosts the majority of the frozen Russian assets via the financial clearing house Euroclear, remains highly cautious. The Belgian government has made it clear that it would require strong, EU-wide guarantees to ensure that it is not left financially or legally exposed if the assets have to be returned.
France and Luxembourg, which also hold a share of the frozen assets, echoed this concern.
“When assets are frozen, one has to respect international law,” said French President Emmanuel Macron, backing Belgium’s stance. “There must be guarantees that the burden is shared and legally defensible.”
Who Bears the Risk—and Reaps the Reward?
Under the Commission’s plan, the EU—not individual member states—would issue the loan and guarantee its repayment with the income generated from the Russian assets. However, this raises several critical questions: How much liability will each EU government assume? What if Russia never agrees to reparations? Who ultimately repays the loan if Moscow doesn’t?
Luxembourg Prime Minister Luc Frieden voiced those concerns.
“You can't just take over assets that belong to another state so easily,” he said. “Among other things, how would such a loan be repaid? What would happen if Russia did not repay these reparations in a peace treaty?”
Dutch Prime Minister Dick Schoof took a more measured stance, saying the proposal should be “seriously considered” as long as the legal and financial risks are covered.
Meanwhile, Swedish Prime Minister Ulf Kristersson offered more enthusiastic support, calling the idea “very much in favour” of helping Ukraine sustain itself.
Geopolitical Stakes and Economic Interests
Beyond legality, the proposal has opened a debate on who should benefit from Ukraine’s military procurement using the loan. France has insisted that Ukraine should prioritize European defense companies, not just American suppliers.
“We are open to the idea,” said a French government official, “but the loan must benefit Europe as well. Defense procurement should be shared across European partners.”
Germany and Italy, both with large defense industries, are quietly supportive of this stance, seeing an opportunity to boost domestic military manufacturing in the process.
At the same time, France emphasized that non-EU G7 countries—such as the United States, Canada, Japan, and the United Kingdom—should contribute to the plan or provide similar guarantees. A G7 finance ministers’ meeting was held via teleconference on Wednesday to discuss broader participation.
Kremlin Condemns the Plan
The Kremlin has sharply criticized the proposal, calling it an act of “pure theft.” Russian officials argue that the use of sovereign reserves to fund a hostile nation’s war effort constitutes a gross violation of international law and Russia’s property rights.
Moscow has threatened legal and retaliatory action if the EU proceeds. Such retaliation could include the seizure of Western assets in Russia or legal battles in international courts.
Looking Ahead: October Summit Key
German Chancellor Friedrich Merz said he expects EU leaders to grant the Commission a mandate to draft a full proposal ahead of the next major EU summit scheduled for October 23–24. However, the final structure will depend heavily on the legal findings and the willingness of EU governments to accept collective liability.
EU foreign policy chief Kaja Kallas admitted that consensus is still lacking.
“Not all member states are there. It’s not supported by everybody yet,” Kallas said. “We still have a lot of work to do. I can’t set a deadline. We are trying to do it as fast as possible.”
Conclusion: A Historic Financial Gamble?
If adopted, the loan backed by frozen Russian assets would mark a historic shift in how Western governments respond to aggression—leveraging the financial power of sanctions not just to punish, but to rebuild.
But for all its political appeal, the proposal remains fraught with uncertainty. Between international law, financial risk, and political unity, EU leaders must tread carefully. Still, with Ukraine’s future hanging in the balance, the pressure to find a workable solution is mounting.
Whether this plan becomes a model for future geopolitical conflicts—or a legal quagmire—will depend on the weeks ahead.