The clock is ticking for the European Union to find a way to support Ukraine’s financial and military engagement before foreign aid flows, severely affected by the Trump administration’s withdrawal, run out.
The stakes couldn’t be higher. President Volodymyr Zelenskiy said his country would need the money “from the beginning” of next year.
“I don’t know if it’s possible. It’s not all up to us,” Zelenskiy said.
Belgium last week made a revolutionary plan Utilizing the idle assets of the Russian Central Bank, issue a 140 billion euro loan to Kiev. As a major holder of assets, Belgium is concerned about the possibility of being left open to Moscow’s retaliation and demands full guarantees to ensure full solidarity among member states.
Although there is a principle that compensation loan Although it has broad support from most capitals, it remains unclear whether the EU will be able to convince Belgian Prime Minister Bart de Weber before the summit meets again in December.
The European Commission is expected to submit an options document in the coming weeks listing potential alternatives to compensation financing from best to worst.
Here’s what the long-awaited paper might (or might not) include:
original compensation loan
Despite the many questions and concerns raised by the Belgian government, the Commission tends to stick with its original idea of reparation financing.
Under the tentative plan, Euroclear, the central securities depository in Brussels, would transfer the stuck Russian assets to the European Commission, which would then use the funds to issue compensation loans to Ukraine. The envelope, amounting to 140 billion euros, will be paid out in stages over time with conditions.
Ukraine will only be required to repay the loan if Russia agrees to pay damages. The European Commission would then repay Euroclear, which in turn would repay Russia, completing the circle and theoretically avoiding confiscation.
Earlier this week, Ursula von der Leyen admitted: The plan is “not easy” But he insisted it was “legally sound” and that all outstanding issues could be resolved.
Committee officials have said privately that the precarious state of the state budget will ultimately be the strongest argument in favor of a bold solution.
Danish Prime Minister Mette Frederiksen stood by von der Leyen and said: “For me, there is no alternative to compensation financing.”
“I really like the idea that that’s the only way forward and that Russia will pay for the damage that Russia has done and committed in Ukraine.”
Expansion of compensation financing
One of the most repeated complaints from Belgium is the fact that the European Commission’s plan is based solely on Euroclear’s holdings of around 185 billion euros. (The EU will have to set aside €45 billion to cover the ongoing G7 credit facility backed by windfall profits, which will disappear.)
Nevertheless, for the past three years, the European Commission has publicly stated that the Russian Central Bank’s assets locked up across the EU are worth around 210 billion euros.
This means that at least 25 billion euros may remain in unaccounted for.
“The fattest chicken is in Belgium, but there are other chickens around,” de Wever said after the decisive summit. “No one talks about this.”
The commission has so far declined to disclose the location of other assets.
According to recent research According to the European Parliament’s Research Directorate, France holds around 19 billion euros, which equates to 22.8 billion euros. reported At the beginning of the full-scale invasion, Luxembourg was paid around 10 to 20 billion euros.
Both countries also initially expressed concerns about reparation financing.
In a joint statement to Euronews, Luxembourg’s finance and foreign ministers provided significantly different numbers. “The amount of assets of the Central Bank of Russia currently fixed in Luxembourg is less than 10,000 euros,” they said.
The European Commission could address one of Belgium’s main complaints by finding remaining assets in the EU and adding them to the proposal. However, if assets are held in personal accounts, bank secrecy principles can complicate the task.
All this together would be significantly less than the total amount held by Belgium, which would be at the heart of the proposal.
The UK, Canada and Japan also hold shares in Russian government assets, but these are not under EU jurisdiction, so the European Commission has no right to pool them.
Joint and several obligations without assets
If Belgium continues to refuse, the European Commission’s financing plan will collapse and funds will have to be found elsewhere. One option is financial markets.
The Commission could issue new debt on behalf of all member states to support new loans to Ukraine. this was done in the first years of the war The plan is to launch a macro-financial assistance (MFA) program that Kyiv will have to repay at some point.
But imposing new repayment loans on an invaded Ukraine facing huge reconstruction costs may seem counterproductive.
Alternatively, the committee could issue grants, or collective debt, to make contributions. In this scenario, the financial burden would be placed on member states themselves, a prospect that is difficult for many cash-strapped capitals to accept.
“If Europe wants to create money, it can create money. This is called debt,” de Wever said. “But, of course, this is also a very sensitive topic.”
bilateral agreement
If action at EU level fails, an agreement between countries could be an option, but this is not new.
Since the beginning of the full-scale invasion, member states have provided aid to Ukraine on a strictly bilateral basis. This helped circumvent the Hungarian veto. military aid, But it also caused major differences between the capitals.
According to As a research instituteGermany (17.7 billion euros), Denmark (9.2 billion euros), the Netherlands (8 billion euros) and Sweden (7.1 billion euros) are the main suppliers of arms and ammunition to Ukraine. In contrast, countries such as Italy and Spain, despite their large economies, lag far behind.
A similar move could be repeated to continue aid to Ukraine in the coming years, covering both budgetary and military needs. The committee could act as a coordinator to ensure consistency between all the different envelopes.
However, this model has a significant drawback in that it is highly sensitive to election cycles. The newly appointed prime minister could decide to cut or cut aid, forcing other member states to step up intervention to offset the interruption.
This is why the European Commission prefers to provide solutions at EU level that are protected from political instability. This logic inspired the creation of the Ukraine Facility, a special budget instrument worth 50 billion euros in 2024.
Importantly, only 18 billion euros remain in this facility. This is far less than the nearly 60 billion euros in external aid that Kyiv’s budget requires in 2026-2027.
interim loan
The December summit is being framed as a time for leaders to make decisions, but Belgium (or other member states) could request additional time to discuss options. Asked by Euronews after last week’s summit whether December was seen as an “absolute deadline”, Prime Minister Ursula von der Leyen did not specify a date.
If no decision is taken and the issue is postponed until next year, the EU could offer a bridge solution – a small loan to cover Ukraine’s most urgent needs for six months.
The loan will serve as a financial stopgap while discussions on sovereign assets continue at the highest levels. It may be an easy sell for governments worried about taxpayer backlash, but it will only set them up for future failure.
Ultimately, leaders will need to make decisions about what constitutes unprecedented fiscal management.
