EU Leaders Face Tough Choices on Funding Ukraine's Defense with Frozen Russian Assets

As European leaders gather for a critical summit in Brussels, the pressure mounts to effectively utilize Russia's frozen assets for Ukraine's defense. With Kyiv facing increasing pressure to cede territory amid Russia's advances, EU leaders are being urged to deliver on their promise for urgent financial assistance. European Commission President Ursula von der Leyen emphasized the importance of supporting Ukraine, declaring that Europe must take responsibility for its own security in a perilous world. She stated that the upcoming days would be vital in securing the necessary funding. Earlier this month, von der Leyen proposed two potential options to cover Ukraine's urgent military and civilian needs for 2026 and 2027: joint EU borrowing or a reparations loan secured against the frozen Russian assets located in the bloc. Belgium, which houses most of the 210 billion euros in immobilized Russian assets, has expressed concerns over potential financial repercussions if the loan scheme fails, fearing a multi-billion-euro bill would fall on its shoulders. Moreover, the Russian central bank recently announced it is seeking 230 billion euros in damages against Euroclear, the Brussels-based securities depository that holds a major portion of Russia’s sovereign wealth. Belgium is worried that allied nations of Russia could retaliate by seizing Western assets to enforce claims against Euroclear. Italy has emerged as a significant ally in this endeavor. Prime Minister Giorgia Meloni warned against using Russian assets to support Ukraine without a solid legal foundation, stating that such an action would grant Moscow its first victory since the war began. Meloni underscored that while it is essential for Russia to restore what it has destroyed, it must be done legally. German Chancellor Friedrich Merz is advocating for the potential use of 90 billion euros in frozen Russian assets for Ukraine, asserting that it would send a strong message to Russian President Vladimir Putin. He stated that the proposed plan aligns with international law, addressing Belgium's concerns while recognizing the need for a balanced approach. Under the reparations loan proposal, the EU would extend a 90 billion euro loan to Kyiv funded through borrowing from Euroclear, contingent upon Moscow eventually paying reparations to Ukraine. EU officials maintain that Russia's claims on these assets would remain intact, but Russia views this strategy as a form of theft, vowing to retaliate. Despite challenges, EU officials involved in the summit preparations indicate that the reparations loan may be the most viable option, as the need for unanimity in using the EU budget complicates matters. Hungary's government, notorious for its hostile stance towards Ukraine, has already pledged to veto any attempts to utilize the EU budget as collateral for a loan. On the contrary, most EU member states reportedly support the reparations loan—requiring only a simple majority—making it a more feasible path forward. The EU has also utilized emergency powers to indefinitely freeze 210 billion euros in Russian assets within the bloc to maintain control over the funds, even in the face of potential vetoes from member states. While Belgium has floated the idea of employing emergency powers to generate an EU loan for Ukraine secured against the budget, several countries regard this as a too convoluted legal pathway. One senior EU diplomat expressed doubts about the feasibility of circumventing the need for consensus through such legal maneuvers. As the summit unfolds, the discussions around funding Ukraine’s defense could set a critical precedent not only for European unity but also for its collective response to global security threats. With different perspectives at play, the European leaders must reconcile their approaches to uphold both international obligations and the urgent needs of a nation under attack. Related Sources: • Source 1 • Source 2