Brussels: The European Union and its allies are preparing an unprecedented financial mechanism that could reshape how frozen Russian assets are deployed. Rather than seizing Moscow’s funds outright, Brussels is steering toward a scheme that would transform these immobilized reserves into the backbone of a loan for Ukraine one that is repayable only through future reparations from Russia.
Since Russia’s full-scale invasion of Ukraine in 2022, about $300 billion in Russian central bank assets have been immobilized in Western jurisdictions. Europe holds the bulk of these funds, with roughly €210 billion under custody, mainly at Euroclear in Belgium. Of this, nearly €175 billion has already matured into cash. Policymakers now see an opportunity: by moving these funds into a Special Purpose Vehicle (SPV), they can generate returns and provide Ukraine with vital liquidity, while still adhering to international law.
Under the proposed system, the SPV would issue a loan to Ukraine backed by the frozen cash. Crucially, repayment would only occur if and when Russia pays reparations as part of a future settlement. In the meantime, the cash would be invested more dynamically than standard central bank deposits, producing yields that can support Ukraine’s reconstruction and defense. The European Commission insists this is not confiscation, but a way to mobilize idle funds without breaching sovereign immunity principles.
Before opening the spigot, EU officials plan to address existing financial obligations. In particular, the €45 billion G7 loan extended to Ukraine earlier this year would be repaid using profits generated from the frozen assets. That repayment would reduce the available pool but still leave around €130 billion that could be leveraged through the reparations-loan structure. The precise figure will depend on Ukraine’s assessed needs for 2026–27, in consultation with the International Monetary Fund.
The initiative is not without controversy. Critics warn of legal retaliation from Moscow, which could launch claims in international courts. To mitigate that risk, Euroclear would receive bonds from the SPV as protection against Russian lawsuits. Even so, the plan pushes the boundaries of financial law, raising concerns within the European Central Bank and among cautious member states.
Politically, the project also risks division. Hungary and Slovakia, which maintain warmer ties with Russia, may refuse to participate. EU officials suggest the SPV could still move forward without full unanimity, but such fractures highlight the complexity of maintaining unity on high-stakes financial matters.
For Ukraine, this scheme represents more than money. It signals Europe’s determination to provide long-term backing at a time when battlefield progress is uncertain and reconstruction costs mount. For the West, it demonstrates a new willingness to use financial tools creatively not merely to punish Moscow but to actively sustain Kyiv.
Whether this plan succeeds will depend on careful navigation of legal, diplomatic, and economic shoals. But one thing is clear: Russia’s frozen billions are no longer just idle reserves. They have become a central weapon in Europe’s strategy to help Ukraine endure, rebuild, and ultimately seek justice.