The European Union is exploring the use of frozen Russian assets to fund a €140 billion loan to Ukraine, a proposal outlined by Economy Commissioner Valdis Dombrovskis. The loan would be secured by the frozen Russian Central Bank assets, and repayment would depend on whether Ukraine receives reparations from Russia. Dombrovskis emphasized that the guarantees should not be considered part of national deficit calculations, with Eurostat tasked to verify this structure. The proposal was discussed during the ECOFIN meeting of EU finance ministers in Luxembourg, where officials debated the legal and financial implications of such a move.
While the EU plans to use the frozen funds as a financial tool, Euroclear, the financial clearinghouse holding the assets, has expressed caution about leveraging these assets, fearing legal repercussions. Belgium, France, and Luxembourg have also raised concerns, urging the EU to implement safeguards to prevent any single member state from bearing excessive risk if the assets are ever returned. President Ursula von der Leyen confirmed that the European Commission will refine the plan to address these concerns. Meanwhile, Russia has denounced the use of its sovereign reserves as theft, and European Central Bank President Christine Lagarde has warned against actions that could undermine the credibility of the euro and financial stability.
The frozen assets, valued at an estimated €300-350 billion, have been held in Western jurisdictions since 2022. These funds are primarily under the control of Euroclear, a Brussels-based clearinghouse. Ukraine and its Western allies have already established a mechanism to utilize the profits generated from these immobilized funds for reconstruction efforts. Over €1 billion has been transferred to Ukraine’s reconstruction efforts. Euroclear expressed caution regarding proposals to leverage the frozen assets, warning that such actions could be perceived as indirect seizure and expose the institution to legal challenges. As a result, Belgium, France, and Luxembourg have called for the EU to implement safeguard measures to ensure that no member state shoulders disproportionate financial risk in the event the assets are ever returned.
President Ursula von der Leyen has acknowledged the need to refine the plan to address these concerns, with the European Commission continuing its technical work with member states and coordinating with G7 partners at the upcoming IMF Annual Meetings in Washington, DC. Meanwhile, Russia has condemned the use of its sovereign reserves as theft, while European Central Bank President Christine Lagarde has cautioned against any actions that could damage the credibility of the euro or undermine financial stability. The plan represents a significant step in the EU’s strategy to support Ukraine’s reconstruction efforts, effectively front-loading potential reparations from Russia.