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A heavily damaged apartment building stands amidst debris in Kyiv, Ukraine, following a shelling incident that reportedly killed one person and injured 19. By MDL.

Economy

EU’s Ukraine Aid: How a 130 Billion Euro Loan Leverages Frozen Russian Assets

EU plans a 130B euro loan for Ukraine, using frozen Russian assets, repaid via reparations from Russia.

byAndres Castro

September 24, 2025, 7:31 PM

Executive Summary

The European Union is proposing a “reparations loan” for Ukraine of up to 130 billion euros, contingent on future reparations from Russia.

This loan would be financed by cash balances from approximately 210 billion euros in immobilized Russian assets, primarily held in Belgium’s Euroclear, after repaying a 45 billion euro G7 loan.

The EU aims to utilize these frozen assets without outright confiscation, likely through a Special Purpose Vehicle (SPV) issuing zero-coupon bonds, with the final size awaiting an IMF assessment of Ukraine’s financing needs.

The Story So Far

The European Union’s proposal for a reparations loan to Ukraine stems directly from Russia’s 2022 invasion, which has created an urgent need for financial support for Kyiv’s ongoing war effort. Following the invasion, the West immobilized approximately 210 billion euros in Russian assets, primarily held in Belgium, and the EU is now seeking to utilize these funds to aid Ukraine without resorting to outright confiscation, a measure many consider legally problematic.

Why This Matters

The European Union’s proposed 130 billion euro “reparations loan” to Ukraine, leveraging immobilized Russian assets without outright confiscation, signifies a major and complex long-term financial commitment from the EU and potentially G7 nations. This innovative funding mechanism, contingent on future Russian reparations, shifts a substantial financial risk to European taxpayers while providing crucial support for Ukraine’s ongoing war effort and potentially setting a precedent for utilizing aggressor state assets in future conflicts.

Who Thinks What?

European Commission President Ursula von der Leyen and EU officials are proposing a “reparations loan” of up to 130 billion euros for Ukraine, leveraging immobilized Russian assets to fund Kyiv’s war effort with repayment contingent on future reparations from Russia.

Many EU governments and the European Central Bank consider outright confiscation of Russian assets a “red line,” advocating for a mechanism like a Special Purpose Vehicle (SPV) that utilizes the assets for Ukraine without direct confiscation.

EU Economic Commissioner Valdis Dombrovskis states that the exact size of the loan will be determined only after an assessment from the International Monetary Fund (IMF) regarding Ukraine’s financing needs for 2026 and 2027.

The European Union’s proposed “reparations loan” for Ukraine could reach up to 130 billion euros, according to EU officials close to the discussions. This financial instrument, first suggested by European Commission President Ursula von der Leyen in September, aims to help Kyiv fund its ongoing war effort, with repayment contingent on Ukraine receiving reparations from Russia in a future peace accord. The initiative leverages cash balances from approximately 210 billion euros in Russian assets immobilized in the West since Russia’s 2022 invasion, primarily held in Belgium’s Euroclear central securities depository.

Funding Mechanism and Asset Utilization

Most of the frozen Russian assets, valued at roughly 210 billion euros, are held within the Belgian central securities depository, Euroclear. Officials noted that 175 billion euros of these assets have now matured, converting into cash that could form the basis of this new loan facility.

Before proceeding with the new reparations loan, the EU intends to repay a 45 billion euro G7 loan agreed last year. This repayment would leave approximately 130 billion euros from the available cash balance to be allocated for the new instrument, according to three officials involved in the discussions. The collective risk of this loan would be borne by European and potentially other G7 countries.

Timeline and Legal Framework

EU Economic Commissioner Valdis Dombrovskis stated that the Commission will determine the exact size of the loan only after receiving an assessment from the International Monetary Fund (IMF) regarding Ukraine’s financing needs for 2026 and 2027. Senior EU finance ministry officials have emphasized that concrete details of the mechanism are still under development.

A key challenge for the Commission is devising a mechanism that utilizes the frozen Russian assets without outright confiscation, a measure that many EU governments and the European Central Bank consider a red line. The proposed structure for the reparations loan is likely to involve a Special Purpose Vehicle (SPV). This vehicle would receive the immobilized Russian cash from Euroclear in exchange for zero-coupon bonds issued by the European Commission, backed by guarantees from EU and potentially G7 governments.

Outlook

The proposed reparations loan represents a significant EU effort to provide long-term financial support to Ukraine, leveraging immobilized Russian assets while navigating complex legal and financial considerations. Its final structure and size remain subject to international assessments and intricate negotiations among EU member states and G7 partners.