The European Commission is preparing a legal proposal this week that would allow immobilized Russian assets to fund Ukraine while keeping the options open for EU borrowing or a mix of both approaches.
Structure of the draft proposal
According to four sources who spoke to Reuters on Tuesday, the draft would set up a mechanism enabling the bloc to draw on the revenues generated by Russia’s immobilized central bank assets to provide financing for Kyiv, while simultaneously maintaining the possibility of raising funds on financial markets if needed.
The borrowing option – which, unlike the Russian-asset approach, would not be backed by immobilized Russian funds – would be repaid by EU member states or through new EU revenue sources. This route would be politically simpler, although several states remain highly skeptical of taking on new common EU debt, including Germany, the Netherlands, and Sweden.
Commission’s preferred route and legal concerns
Under the proposal of funding Ukraine through a credit backed by frozen Russian assets, the country would only be required to repay the loan if Russia pays reparations for damage caused by its war. The Commission is expected to adopt the plan on Wednesday, which includes what officials consider its preferred option: a reparations-linked loan backed by cash balances from the frozen Russian assets.
A European Commission spokesperson declined to comment on the substance of the proposal, saying in a written reply to Reuters that commissioners “will discuss the financing options for Ukraine” and are “due to adopt the respective legal proposals.”
EU leaders agreed in October to meet Ukraine’s “pressing financial needs” over the next two years, but they stopped short of endorsing a plan to use €140 billion ($162 billion) in frozen Russian sovereign assets in Europe as a loan for Kyiv due to concerns raised by Belgium.
Most of the Russian assets frozen in Europe are held in accounts at the Belgian securities depository Euroclear, and Belgian authorities have repeatedly highlighted legal risks related to their use.