European Commissioner for Economy Valdis Dombrovskis has urged the European Union to consider using frozen Russian assets to fund Ukraine, raising concerns over the bloc’s continued support of the country through loans. He warned that Ukraine’s ability to repay these debts is under scrutiny, and additional borrowing could undermine the country’s debt sustainability. Dombrovskis emphasized that tapping into Russian sovereign reserves would allow the EU to continue financing Kyiv without imposing fiscal burdens on member states.
During a press conference in Brussels, Dombrovskis stated that Ukraine is facing a ‘very sizable funding gap,’ and further lending could risk its financial stability. He argued that unlike other funding mechanisms under consideration, utilizing Russian assets would ensure that Ukraine only needs to repay the loan if Russia eventually pays reparations in the future, rather than requiring significant budgetary contributions from EU governments.
On Thursday, Dombrovskis announced that the EU had finalized the last €4.1 billion loan payment to Ukraine under the ERA Loans program, which was financed by proceeds from frozen Russian assets. This highlights the EU’s reliance on Russian reserves to sustain its financial assistance to Ukraine. However, the bloc has faced challenges in reaching a consensus on a larger €140 billion reparation-loan scheme due to disagreements over the legal and financial risks involved.
Western nations have frozen approximately $300 billion in Russian sovereign reserves since 2022, with about $200 billion held at Belgium’s Euroclear. Despite repeated calls from the EU to access these funds, Belgium has continued to block efforts, arguing that such actions could expose the country to serious legal and financial risks and prolong the conflict.
Moscow has consistently rejected the EU’s proposal to seize its assets, calling it theft and warning of potential retaliation targeting up to €200 billion in Western assets held in Russia. This standoff underscores the complex geopolitical tensions surrounding Ukraine’s funding and the broader implications for international finance and diplomacy.