EU to Fund Ukraine with Loans Backed by Frozen Russian Assets
Orbán has routinely obstructed EU aid to Kyiv, citing national sovereignty and opposition to sanctions on Russia.
The 7th European Political Community Summit (EPC) kicks off in Copenhagen, Denmark on October 2, 2025. European leaders are gathering in Copenhagen on Thursday for a summit focused on the war in Ukraine and wider European security. Photo by Anadolu Images.
E
uropean Union leaders on Wednesday discussed a new scheme to sustain long-term financial and military assistance to Ukraine by leveraging hundreds of billions of euros in frozen Russian assets, a move Moscow condemned as “theft.”
The proposal underscores the bloc’s growing resolve to act independently in supporting Kyiv amid the United States’ retreat from direct financial aid under President Donald Trump. Washington has halted most assistance to Ukraine, leaving European partners scrambling to fill the gap as the war with Russia grinds through its fourth year.
According to the European Commission, Ukraine’s budgetary and defense requirements for 2026 and 2027 are expected to total around 130 billion euros ($153 billion). The EU has already disbursed 174 billion euros in support since Russia’s full-scale invasion began in February 2022, but officials warn that the financial burden is becoming unsustainable without new mechanisms.
Frozen Russian sovereign assets
At the center of the debate are frozen Russian sovereign assets, primarily held in European institutions since the start of the war. The largest tranche — about 194 billion euros — is located in Belgium, while Japan holds roughly $50 billion, and smaller amounts are stored in the U.S., U.K., and Canada.
European Commission President Ursula von der Leyen said her team was working on a “reparation loan” backed by these frozen assets. The concept would allow the EU to raise up to 140 billion euros ($165 billion) in financing for Kyiv, with repayment deferred until Russia pays reparations for the destruction caused by its invasion.
“We are not confiscating the assets, but we are taking the cash balances for a loan to Ukraine,” von der Leyen told reporters in Copenhagen. “Ukraine has to pay back this loan if Russia pays reparations. Russia is the perpetrator. It has caused the damage and must be held accountable.”
She added that the plan offered “a sound legal way” to provide Ukraine with immediate relief while keeping faith with international law and maintaining cohesion among the bloc’s 27 member states.
Legal and political hurdles
The initiative, however, faces stiff legal and political challenges. While several countries, including Denmark, Finland, and Sweden, have expressed strong support, others remain cautious about potential repercussions.
Danish Prime Minister Mette Frederiksen, who hosted the EU summit, praised the plan as “a good way forward” but admitted there were “some legal questions that have to be asked.”
The European Central Bank (ECB) has also raised concerns, warning that outright confiscation of Russian assets could undermine confidence in the euro and destabilize global markets. Belgium, home to the financial clearinghouse Euroclear, is particularly wary of acting unilaterally, fearing possible Russian retaliation and reputational damage.
“If we don’t take those assets into account, then it’s on our taxpayers — that’s for sure,” said EU foreign policy chief Kaja Kallas, while acknowledging that the proposal is “not supported by everybody yet.”
The European Commission insists the scheme does not involve seizing Russian funds but using the profits generated by the frozen assets — mainly interest and investment returns — as collateral for the loan. That distinction, officials argue, could help the EU sidestep accusations of illegality while providing crucial funds to Kyiv.
Russia fumes over ‘theft’
The Kremlin swiftly denounced the EU’s discussions. Spokesman Dmitry Peskov said in a conference call with reporters that any move to repurpose Russian assets “amounts to plans to illegally confiscate Russian property — in Russian, we call it theft.”
Moscow has repeatedly warned that such actions would lead to retaliation and further strain relations with European capitals. Russia has already enacted laws allowing it to seize Western assets within its borders in response to similar measures.
Nonetheless, von der Leyen and several European leaders insist the bloc has both the legal and moral grounds to act. “Russia launched this war, caused the destruction, and must pay for it,” von der Leyen said. “Europe cannot wait indefinitely while Ukraine’s economy bleeds.”
France cautious, Nordics supportive
Among EU heavyweights, France has taken a cautious stance. President Emmanuel Macron expressed tentative support for the idea but stressed that Europe must remain “a place that’s attractive and reliable.”
“When assets are frozen, we respect international law,” Macron said, noting that any deviation could deter global investors.
Other northern European states have been more forthright. In a joint letter to their EU counterparts, Finland and Sweden called the reparation loan “a responsible and necessary step.”
“Investing in Ukraine is an investment in European security as a whole,” the letter said. “It is key that the loan to Ukraine is only to be repaid once Ukraine receives war reparations from Russia.”
Funding urgency
With U.S. support uncertain and European budgets strained, leaders are under mounting pressure to find creative financing methods to sustain Ukraine through 2026 and beyond. Several EU states, including Italy and France, face high public debt, while others have shifted resources toward defense and energy security.
The bloc’s next long-term budget cycle is expected to include Ukraine as a central pillar, but officials fear that Hungary, led by Prime Minister Viktor Orbán, could again veto new funding measures. Orbán has routinely obstructed EU aid to Kyiv, citing national sovereignty and opposition to sanctions on Russia.
If consensus cannot be reached, member states could move ahead with the loan plan using national guarantees outside the EU framework — a legally complex but increasingly realistic option.
Von der Leyen said she expects technical and legal discussions to continue “for several weeks” but expressed optimism that “Europe’s unity on Ukraine will prevail.”
As the Copenhagen summit concluded, Frederiksen summed up the mood: “This is about Europe taking responsibility. Ukraine’s struggle is also our struggle — and our credibility as a continent depends on what we do next.”
(Source: The Associated Press)
