The European Commission is developing a mechanism to provide Ukraine with a reparations loan, which will be based on frozen Russian assets. This financial instrument aims to supply Ukraine with the necessary resources to continue resisting Russian aggression and to support the state budget.
This is reported by Kyiv24
Ukraine’s Needs and Funding Sources
According to estimates by the International Monetary Fund, Ukraine will require around 52 billion euros in budget support by 2026-2027. However, this amount does not include expenses for equipping the Armed Forces of Ukraine. Depending on the situation at the front, the total need could rise to 80 billion euros in the next two years. The absence of such assistance, according to the European Commission, could lead to critical consequences for Ukraine and create serious security threats for all of Europe.
“Thus, the sums are quite significant, and depending on the forecast regarding combat actions, they could easily increase to about 80 billion over the next two years… Failure to provide support will most likely lead to the collapse of Ukraine, which we believe would pose a serious threat to the security of Europe,” emphasized a European Commission official.
Amid uncertainty regarding further financial support from the United States, European governments are considering using frozen Russian assets as an alternative source of funding for Ukraine. At the same time, the EU insists on compliance with international law and does not consider the confiscation of these assets, but rather their temporary use for providing a loan.
How the Reparations Loan Mechanism Will Work
The proposed scheme envisions that the Euroclear depository, which holds the frozen Russian assets, will invest the accumulated cash in the European Central Bank. The funds obtained will be directed by the EU to issue a loan to Ukraine with limited recourse. This means that Ukraine will repay the debt only after Russia compensates for the damages caused by its aggression.
EU leaders have already agreed that Russian assets will remain frozen until the end of the war and the payment of reparations. Under these conditions, the risks for creditors are minimal, and there is no need for guarantees from member states. If Russia refuses to pay reparations, the assets will remain inaccessible, and the EU will not seek repayment from Ukraine.
In the event that Ukraine receives reparations from Russia, it will repay the loan provided to it, and the EU will receive funds from Euroclear, which in turn will transfer them to the Russian side. By the decision of the EU summit in October 2024, Russian assets are to remain blocked until all conditions are met. To maintain them in this state, the European Commission proposes to continue sanctions twice a year, with the support of a qualified majority of EU members.
Negotiations are currently underway between the European Commission and member states regarding the final format of the reparations loan. A specific proposal is expected to be developed after the EU leaders’ summit at the end of October.
As of October 2025, frozen Russian assets worth approximately 176 billion euros are held in Euroclear. Brussels is considering the possibility of directing these funds to finance a loan for Ukraine at 0% interest, which the state will only be obligated to repay if it receives compensation from Russia.
The Kremlin has already criticized this initiative, calling it “pure theft.” At the same time, in response to potential actions by the EU, Russian President Vladimir Putin signed a decree on a new procedure for managing federal assets, and the Russian authorities expressed readiness for the nationalization and sale of foreign assets in the event of the seizure of their funds abroad.