Russian-Ukraine conflict: EU plans to use Moscow’s frozen assets to fund Kyiv; here’s how
The European Union is working on a new financial plan to support Ukraine’s defence and rebuilding efforts by tapping into Russian central bank assets frozen in the West since Moscow’s invasion.Directly seizing these sovereign assets is banned under international law, so the European Commission has proposed a workaround that would allow EU governments to use the funds without technically confiscating them, Reuters reported. The plan involves using most of the 210 billion euros worth of Russian assets currently frozen in Europe, a sensitive issue for many EU capitals and the European Central Bank.
The proposal has drawn broad political backing in principle, but several member states want more legal clarity before moving forward. Belgium, which hosts the Euroclear clearing house and has an annual national output of around 600 billion euros, has been particularly cautious about the financial and legal risks involved.
Redirecting frozen funds
When Russia launched its full-scale war in Ukraine, Euroclear held Russian central bank bonds. As these bonds matured, the proceeds were frozen under EU sanctions. The Commission’s plan would see these frozen cash balances channelled to the EU.In exchange, Euroclear would receive zero-coupon bonds from the Commission of the same value. The EU would then use the cash to issue what it calls a “Reparations Loan” to Ukraine. Kyiv would only repay this loan once it receives war reparations from Moscow in a future peace settlement, giving it access to the money immediately instead of waiting for compensation from Russia.
Size of the pot
Around $300 billion of Russian assets have been frozen worldwide. Of that, 210 billion euros ($229 billion) is held in Europe, with 185 billion euros managed by Euroclear in Brussels. Roughly 176 billion euros is already in cash, and another 9 billion euros in securities is set to mature in 2026.The EU would first use part of this to repay the 45 billion euros ($50 billion) G7 loan agreed with Ukraine last year, leaving about 140 billion euros to finance the new loan. The exact amount will depend on an International Monetary Fund assessment of Ukraine’s financial needs in 2026 and 2027. Finland and Sweden estimate that Kyiv will face a shortfall of around 130 billion euros during that period, Reuters reported.
Legal workaround
To avoid breaching international rules, the cash would be moved from Euroclear into a Special Purpose Vehicle (SPV) owned by EU or G7 governments. The Commission would then issue zero-coupon bonds to Euroclear, backed by the SPV. This structure is meant to protect Euroclear from legal challenges while allowing the EU to use the funds for investment rather than leaving them idle in overnight deposits at the European Central Bank.Russia has rejected the plan, describing it as an “illegal seizure” and warning of retaliatory measures.
Who takes the risk
European Commission President Ursula von der Leyen has said the risk would be shared among EU countries. The plan would need full guarantees from member states, with contributions proportionate to the size of their economies.Belgium has made it clear it does not want to shoulder the risk alone. Prime Minister Bart de Wever told EU leaders that Belgium’s hosting of Euroclear should not make it the only party accountable.“If we take (Russian President Vladimir) Putin’s money, we use it, we’re all going to be responsible if it goes wrong,” he said.He also insisted on strong legal assurances before Belgium signs off on the plan.
