Brussels: The European Union is poised to launch a groundbreaking financial initiative for Ukraine, potentially extending a “reparations loan” of up to €130 billion to aid Kyiv’s ongoing reconstruction and defense efforts. The unprecedented proposal, floated by European Commission President Ursula von der Leyen on September 10, would utilize cash balances from Russian assets frozen in Europe since Moscow’s 2022 invasion of Ukraine.
Under the plan, Ukraine would repay the loan only upon receiving formal reparations from Russia as part of a future peace settlement. The repayment risk would be collectively shared by EU member states and possibly other G7 nations, signaling a coordinated international commitment to Ukraine’s financial stability. Most of the approximately €210 billion in Russian assets held in Europe are deposited with Euroclear, Belgium’s central securities depository, of which €175 billion has matured into cash and could form the foundation of this reparations loan.
Before implementing the plan, EU officials stressed the importance of first repaying a €45 billion G7 loan extended to Ukraine last year. This precaution would leave roughly €130 billion available for the new financial instrument. To navigate legal constraints against outright confiscation of Russian assets a contentious issue for several EU governments and the European Central Bank the loan mechanism is expected to employ a Special Purpose Vehicle (SPV). This structure would allow the immobilized Russian cash to be exchanged for zero-coupon bonds backed by EU and potentially G7 guarantees.
The European Commission is awaiting a comprehensive assessment from the International Monetary Fund to gauge Ukraine’s financing requirements for 2026 and 2027, which will determine the final size and structure of the reparations loan. While detailed agreements are yet to be finalized, the initiative demonstrates the EU’s commitment to innovative financial solutions aimed at sustaining Ukraine’s war effort while adhering to legal frameworks.
As Brussels continues consultations among EU leaders, this proposed “reparations loan” marks a historic approach to leveraging frozen foreign assets to support a war-torn nation, blending international law, diplomacy, and financial ingenuity to uphold stability in Europe’s eastern frontier.