European leaders are searching for ways to keep Ukraine afloat as the war with Russia continues, and as financial support from the United States declines.
Europe is exploring a plan to help Ukraine access tens of billions of euros from Russia’s frozen state assets, without formally seizing the money. Alexander Kolyandr, senior fellow at the Center for European Policy Analysis (CEPA), has highlighted both the financial mechanisms and the legal complexities of the proposal.
Following Russia’s full-scale invasion of Ukraine in 2022, the European Union froze hundreds of billions of euros in Russian assets as part of its sanctions regime. The majority of this money belongs to the Russian Central Bank and represents its foreign exchange reserves, including funds accumulated from oil revenues and held in government and investment-grade bonds across Western financial institutions.
More than €180 billion of these assets are stored at Euroclear, a Belgium-based financial depository that functions as a vault for international securities. Smaller portions are held in other European countries, including France and Germany.
Why Europe is under pressure to act?
Ukraine faces a growing funding crisis. Its budget runs a substantial deficit, and military needs remain high. With Washington scaling back direct financial support, Europe is expected to shoulder most of the burden. International lenders, including the IMF, reportedly will not extend further loans without European guarantees. Kolyandr emphasised that “without European financial backing, Ukraine would not be able to survive financially.”
With Washington no longer providing the same level of financial support, Europe is increasingly expected to shoulder the burden alone.
Proposed solution: borrowing against frozen assets
Instead of seizing the assets, European officials are considering issuing zero-interest “reparations bonds.” Under this plan, Russia’s frozen assets would either serve as collateral or be invested directly in EU-issued bonds.
These bonds would carry guarantees from the European Commission and participating national governments, placing them on par with sovereign debt from countries such as France or Germany. Proceeds would then be distributed to Ukraine in installments, potentially totaling €90 billion over two years.
Ukraine would only repay the loan once it receives compensation from Russia for war-related damages.
Legal and financial obstacles
The plan faces significant hurdles. The European Central Bank has refused to provide a financial backstop, citing legal limits on financing national budgets.
Belgium has emerged as the most vocal critic, warning that it could face enormous liability if Russia challenges the arrangement in court or if EU sanctions are not extended unanimously.
Belgian Foreign Minister Maxime Prévot said, “It is not acceptable to use the money and leave us alone, facing the risks… we demand that the risks Belgium is facing as a result of this scheme are fully covered. This is no unreasonable request. This is simply fairness.”
Kolyandr adds, “Because the whole idea is that this reparation bond stays where it is until Russia settles everything with Ukraine… if Russia refuses, then this money is taken by Ukraine, and Ukraine pays the holders. But the Belgian government… will be forced to cough up an enormous amount of money, which more or less equals the state’s GDP.”
Belgium has called for other European countries and allied partners — including the UK, Canada, and potentially Japan — to share responsibility. Kolyandr notes, “They want the responsibility… shared by other European countries or countries of the willing… so that Belgium doesn’t get left in the cold facing Russia’s demands.”
Belgium has demanded that risks be shared among other European countries and allied partners such as the United Kingdom, Canada and potentially Japan.
Risk of retaliation and political divisions
Russia has repeatedly condemned the use of its frozen assets, warning of retaliation and legal action. Senior Russian officials have described any seizure of state assets as an act that could justify severe countermeasures.
Within the EU, political unity is also fragile. While the European Commission argues the plan can proceed with a qualified majority vote, concerns remain that individual member states could block extensions of sanctions or challenge the legality of the scheme.
If the plan fails, the EU may be forced to rely on additional borrowing through its shared budget — a move that would increase Europe’s already high debt levels and require unanimous approval.
What comes next?
European leaders are expected to continue negotiations this month, but Belgium’s objections remain a major hurdle.
However, Ukraine’s financial needs grow more urgent, and pressure is mounting on the EU to find a workable solution that balances legal risk, political unity and long-term support for Kyiv. For now, Europe’s attempt to unlock Russia’s frozen cash remains a high-stakes financial gamble with far-reaching consequences.
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