The European Council has agreed to provide Ukraine with a €90 billion ($105 billion) loan for 2026-27, aiming to secure the country’s budgetary and military financing as uncertainty persists over longer-term funding arrangements.
The decision, taken at the European Council meeting on Dec. 18-19, followed discussions on Ukraine’s looming financing gap for 2026-27.
The loan will be raised through EU borrowing on capital markets and backed by the EU budget headroom, according to the council’s press release.
The EU will enable the €90 billion loan under Article 20 of the Treaty on European Union and Article 212 of the Treaty on the Functioning of the European Union. The Czech Republic, Hungary, or Slovakia, which previously opposed providing a loan to Ukraine backed by cash balances from immobilized Russian assets, will not be an obstacle to such a decision.
The current loan is intended as an interim solution while the EU finalizes the legal and technical design of a separate reparations-based loan mechanism linked to immobilized Russian sovereign assets.
EU leaders said the loan is designed as a bridge until reparations are received, with Ukraine beginning repayment only once Russia compensates it for the full-scale invasion.
Until then, Russian assets will remain immobilized, and the EU reserves the right, in line with EU and international law, to use proceeds associated with those assets to service the debt if needed.
“And Ukraine will only repay this loan once Russia pays reparations. The Union reserves its right to make use of the immobilised assets to repay this loan,” European Council President António Costa said at the press conference following the meeting.
Opposition to the proposed reparations loan
The EU’s proposed reparations loan, which would have been backed by roughly €210 billion ($181 billion) in immobilized Russian sovereign assets, stalled amid political resistance from several member states and concerns over potential legal and financial risks.
Belgium, the Czech Republic, Hungary, and Slovakia raised objections, arguing that converting frozen assets into long-term financing could expose the EU and key financial intermediaries to litigation and market instability.
Leaders also called on the Council of the EU and the European Parliament to continue work on a legal framework for a reparations loan based on cash balances generated by frozen Russian central bank assets.
“At the same time, we gave a mandate to the Commission to continue working on the reparation loan based on Russian immobilized assets,” Costa said after Thursday’s meeting.
Why the EU’s reparations loan stalled: key points
- Political resistance inside the EU: Belgium, the Czech Republic, Hungary, and Slovakia opposed using frozen Russian assets as collateral for a reparations loan, blocking unanimity.
- Legal risk concerns: Belgian Prime Minister Bart De Wever called the mechanism “fundamentally flawed,” warning Russia could pursue lawsuits against Euroclear, the Belgium-based clearing house holding a large share of the assets.
- Market stability fears: De Wever argued that asset confiscation could force markets to demand higher risk premiums, increasing borrowing costs and creating systemic risks for EU financial markets and the euro.
- IMF caution: In October, IMF European Department Director Alfred Kammer urged caution over the plan, warning of potential implications for the international monetary system in a reply to Kyiv Post’s question on the briefing.
- Counterarguments from economists and legal experts: The Kyiv School of Economics concluded Russia has no viable legal avenues to challenge the scheme, noting Russian court rulings would not be recognized in the EU or UK, while international claims face jurisdictional and public policy barriers.
- Ukraine’s central bank has consistently backed full confiscation of Russian assets, arguing it would not undermine the euro’s role as a major international currency in its April 2025 Inflation Report.
- Limited market reaction precedent: Economists, including Elina Ribakova, noted that markets reacted neutrally when Russian assets were initially frozen, suggesting confiscation would not trigger new instability.
- ECB backstops available: The European Central Bank (ECB) could counter politically driven market stress through its Transmission Protection Instrument and Outright Monetary Transactions framework, allowing bond purchases to stabilize borrowing costs if needed.
Beyond financing, EU leaders reiterated their political, military, and economic support for Ukraine, confirmed continued backing for its EU accession path, and called for stepped-up military assistance, particularly in air defense, ammunition, and anti-drone systems at Thursday’s meeting.
They also urged progress on a new EU sanctions package against Russia, expected to be presented in early 2026.
The European Council said it would return to Ukraine financing and related issues at its next meeting.