European Commission presents proposals for granting Ukraine a "reparations loan" using Russian reserves
On 3 December, the European Commission (EC) officially proposed to EU member states two options for financing Ukraine in the coming years: raising funds on the financial market under the guarantee of the European budget, and issuing a "reparations loan" using Russian sovereign assets frozen in the EU. The EC considers the second option to be the prime one. "We propose to create a reparations loan using cash balances from immobilised Russian assets in the EU," said EC President Ursula von der Leyen. Russia has repeatedly stated that it will regard any use of its sovereign assets as confiscation, and that retaliatory measures may include compensation for damages using the assets of non-residents from unfriendly states located in Russia. The financing option for Ukraine will be chosen at the European Union summit on 18–19 December. "If the EU decides to borrow money to support Ukraine, a unanimous decision will be required. If they choose to use the frozen assets, approval of the plan by a qualified majority will suffice," CNBC quotes an unnamed European official as saying. In the latter case, the decision must made by 15 of the 27 EU countries, and at least 65% of the bloc's population must reside in the approving countries. Hungary's position is considered the main barrier to reaching unanimity on the issue of financial aid to Ukraine. At the same time, Belgium, where most of the Bank of Russia's frozen reserves are located, is the main opponent of a "reparations loan" based on the reserves.
How the loan is proposed to be structured
According to RBC, under the published EC draft, all EU financial institutions holding cash balances from Russian reserves (according to Politico, these are institutions in Belgium, France, Germany, Sweden, and Cyprus) will be required to invest this money through central depositories (mainly the Belgian Euroclear) in a special EU debt instrument, which, in turn, will be used to issue a "reparations loan" to Ukraine. The maximum loan amount is €210 billion (corresponding to the volume of Russia's frozen reserves in the EU), which will be disbursed by the end of 2030. Of this amount, up to €90 billion may be disbursed by the end of 2027. The European Commission, on behalf of the EU, will borrow this money from the financial institutions where the Russian reserves are held. These funds will then be provided to Ukraine in tranches to meet the country's financial needs (to this end, Kyiv will have to submit a special financing strategy for the next 12 months).
The disbursement of loan funds will depend on Ukraine's fulfilment of predetermined conditions, including the maintenance of democratic mechanisms and institutions, respect for human rights, including minorities, and the fight against corruption. The EC proposes to allocate up to €115 billion from the credit line to support Ukraine's "military-industrial capabilities".
If Ukraine fails to comply with the condition of maintaining democracy and the rule of law, it will be obligated to accelerate repayment of the loan funds. Also, if Kyiv commits "fraud, corruption or other illegal activities" in relation to the loan funds, it will have to repay the European Union the amount of the violation.
What safeguards and protective mechanisms did the EC propose?
The loan will be backed by guarantees from EU member states or by the EU's multiannual budget (Belgium was particularly concerned about guarantees in case the money had to be returned to Moscow). A separate EC proposal on "emergency measures" proposes, as an exemption from usual methods, imposing on central depositories the obligation to "invest" Russian cash balances in an EU debt instrument linked to a "reparations loan," and placing a temporary ban on transfer of the frozen assets to the Bank of Russia or entities acting on behalf of or in the interests of the Bank of Russia (instead of the current regular, six-monthly extension of the freeze with the consent of all 27 EU countries).
As a precaution against Russian legal countermeasures, the EC proposed that no judicial, arbitral or administrative decisions obtained by the Russian Federation, its legal entities, bodies and institutions, or by persons acting on their behalf or at their direction, in connection with the use of its funds, shall be recognised, have legal effect or be enforceable in the EU while this Regulation is in force.
Furthermore, if the Russian state decides to "expropriate, attach, confiscate, transfer or take measures with similar consequences in relation to the assets" of EU financial institutions and depositories participating in the "reparations loan" scheme, these EU organisations will be able to seek "compensation for any direct or indirect damages" through the European courts.
EU countries that have bilateral agreements on mutual protection and promotion of investments with Russia are advised to terminate those agreements. Russia has such agreements with Austria, Belgium, Germany, the Netherlands, France, and Italy, for example.
How might Russia respond?
The Russian authorities have already stated that they have prepared possible responses to the confiscation of the reserves. Russia may and likely will take retaliatory measures in the form of a symmetrical expropriation of the assets of European companies that were unable to leave the market or did not leave it in good time (including assets that were transferred to interim management), or Russian subsidiaries of European banks, international sanctions expert George Voloshin told RBC. He also mentioned frozen non-resident funds in "C"-type accounts as a likely target.
Russian electricity assets belonging to the German company Uniper and the Finnish company Fortum, in particular, were transferred to interim administration. At the time (in the spring of 2023), Kremlin press secretary Dmitry Peskov stated explicitly that the purpose of the decree on interim management of certain assets was to create a compensation fund for retaliatory measures against the illegal expropriation of Russian assets abroad.
In November 2025, the State Duma issued an address to the government calling for retaliatory measures, including compensation for damages using the assets of non-residents from unfriendly states. The same document mentioned the need for a legal response "starting with claims for damages — with a request to seize property as a precautionary measure — against Euroclear and Belgium, where the bulk of the illegally frozen sovereign funds are held, in any jurisdiction."
Russia's response will be a "surprise" for the European Union if it decides to definitely seize Russian sovereign assets, Foreign Ministry spokeswoman Maria Zakharova said on 4 December.