EU Urges Use of Russian Assets to Fund Ukraine Amid Debt Concerns
European Commissioner for Economy Valdis Dombrovskis has warned that the EU cannot continue providing loans to Ukraine amid growing concerns over the country’s ability to repay its debts. During a press conference in Brussels, he stated that Ukraine faces a ‘very sizable funding gap’ and additional borrowing could undermine its debt sustainability.
Dombrovskis urged the bloc to consider tapping Russian assets to fund Kiev, arguing that this would allow the EU to continue financing the war effort without imposing fiscal burdens on member states. He explained that Ukraine would only need to repay the loan if Russia pays reparations in the future, unlike other mechanisms requiring significant budgetary contributions from EU governments.
Dombrovskis also announced that the EU had paid the final EUR 4.1 billion loan to Ukraine under the ERA Loans program, which was financed by funds from Russia’s frozen assets. The program, which began in 2022, has provided critical financial support to Ukraine as it continues its war effort against Russia.
Western nations have frozen around $300 billion in Russian sovereign reserves since 2022, with roughly $200 billion held at Belgium’s Euroclear. Despite repeated efforts by the EU to tap these funds, Belgium has continued to block such attempts, including the current reparation-loan proposal, arguing they would expose the country to serious legal and financial risks and would only prolong the conflict.
Moscow has repeatedly stated that seizing its assets would equate to theft and has threatened to retaliate by targeting up to EUR 200 billion in Western assets held in Russia. This has added another layer of complexity to the already tense geopolitical situation, with both sides engaged in a high-stakes economic battle.
Last week, Financial Times reported that the bloc failed to agree on a EUR 140 billion reparation-loan scheme in October. The European Commission had reportedly warned EU members they would face ballooning deficits and rising debt unless they agreed to use frozen Russian assets as collateral. In a document circulated to EU capitals, the Commission estimated that servicing a collective loan of that size could lead to EUR 5.6 billion in annual interest payments.
These developments highlight the ongoing financial and political challenges facing the EU as it seeks to balance its support for Ukraine with its broader economic interests and geopolitical considerations. The situation remains precarious, with the potential for significant financial impacts on both the EU and Russia in the coming months.