Economy

EU’s Ukraine Loan: How Frozen Russian Assets Could Shield Member States’ Finances

EU plans a loan to Ukraine using frozen Russian assets; guarantees won’t hit debt targets.

October 10, 2025, 4:34 PM

Ursula von der Leyen and António Costa at the EU-Moldova Summit

European Commission President Ursula von der Leyen and European Council President António Costa attend the EU-Moldova Summit. By Dan Morar / Shutterstock.com.

Executive Summary

The European Commission proposes a €140 billion loan to Ukraine, backed by frozen Russian assets, and aims for member states’ financial guarantees not to count towards their national deficit and debt targets.

The Commission is exploring methods to prevent individual EU members from blocking the renewal of sanctions against Russia, which currently require unanimous approval.

The EU is encouraging other G7 members to implement similar mechanisms for using frozen Russian assets to support Ukraine, with Britain and Canada reportedly interested.

The Story So Far

The European Union is developing a plan to provide a substantial €140 billion loan to Ukraine, driven by Ukraine’s significant financing gap and reparation needs following the war. This initiative leverages approximately $300-350 billion in Russian central bank assets frozen predominantly in Europe, which are intended to secure the loan, with repayment tied to Russia’s eventual reparations. A key challenge is ensuring that member states’ financial guarantees for this loan do not adversely affect their national deficit and debt targets, while also exploring mechanisms to streamline the renewal of Russia sanctions which currently require unanimous approval.

Why This Matters

The EU’s plan to secure a €140 billion loan for Ukraine using frozen Russian assets, with the critical provision that member states’ guarantees will not impact their national deficit and debt targets, aims to provide significant financial support without burdening individual EU budgets. This initiative, alongside efforts to streamline future Russian sanction renewals by overcoming the unanimity requirement and encouraging G7 partners to adopt similar asset-leveraging mechanisms, signals a more unified and robust strategy for both aiding Ukraine’s recovery and maintaining sustained pressure on Russia.

Who Thinks What?

European Economy Commissioner Valdis Dombrovskis believes that financial guarantees provided by EU member states for the proposed €140 billion loan to Ukraine, secured by frozen Russian assets, should not count towards their national deficit and debt targets.

Italy’s Giancarlo Giorgetti and other EU finance ministers have raised concerns regarding the guarantees for the loan and their potential impact on member states’ deficit and debt levels.

Belgium’s government has indicated that other EU member states must share the financial risk associated with providing the loan to Ukraine.

European Economy Commissioner Valdis Dombrovskis stated on Friday that financial guarantees provided by EU member states for a proposed €140 billion ($162 billion) loan to Ukraine, underpinned by frozen Russian assets, should not count towards their national deficit and debt targets. The loan aims to cover Ukraine’s reparation needs, with repayment contingent on Russia providing reparations for damages incurred during the war.

Loan Guarantees and Fiscal Rules

The European Commission’s plan involves using immobilized Russian assets to secure the substantial loan to Ukraine. EU finance ministers discussed the proposal on Friday, where concerns regarding the guarantees were raised by Italy’s Giancarlo Giorgetti and other ministers.

Dombrovskis indicated that, under the proposed mechanism where the EU retains Russian assets until reparations are paid, the guarantees are not expected to be called upon. However, the EU’s statistics agency, Eurostat, would need to officially confirm that these guarantees do not impact member states’ deficit and debt levels once a definitive plan is established.

Sanctions and International Cooperation

The Commissioner also revealed that the Commission is exploring methods to prevent individual or a small group of EU members from blocking the renewal of sanctions against Russia, which currently require unanimous approval.

Dombrovskis cited an International Monetary Fund (IMF) estimate that Ukraine faces a $60 billion financing gap for 2026 and 2027, excluding military aid. Support for Ukraine is slated for discussion among G7 ministers at the upcoming World Bank and IMF annual meetings in Washington.

While the EU is not seeking guarantees for its loan from other G7 members, it is encouraging them to implement similar mechanisms for Russian assets frozen within their jurisdictions. Britain and Canada have reportedly expressed interest in adopting a model similar to the European approach.

Frozen Russian Assets

The Russian central bank has confirmed that approximately $300-350 billion worth of its assets are frozen in Western countries. The majority of these assets are located in Europe, with many having matured and now held as cash by the Belgian securities repository Euroclear.

Belgium has previously indicated that other EU member states must share the financial risk associated with providing the loan to Ukraine.

Key Takeaways

The EU is advancing a plan to leverage frozen Russian assets for a significant loan to Ukraine, with discussions focusing on ensuring these financial commitments do not adversely affect member states’ fiscal targets. Concurrently, the EU is addressing the unanimity requirement for sanctions and seeking international alignment on using frozen assets to support Ukraine’s recovery.