West Weighs Plan to Fund Ukraine with Russian Assets

European Union and G7 leaders are set to discuss a groundbreaking proposal to leverage frozen Russian sovereign assets to finance a massive loan for Ukraine. The plan, championed by the European Commission, seeks to provide Kyiv with a financial lifeline without the direct and legally contentious confiscation of the assets themselves.

At the heart of the new mechanism is a proposed ‘reparation loan’ for Ukraine, which could amount to as much as €130 billion. Under this scheme, the EU would provide immediate funds to Kyiv. The repayment obligation for Ukraine would only be triggered once Russia begins to pay war reparations. The frozen Russian assets, estimated at around $300 billion globally with over two-thirds held in the EU, would effectively serve as collateral for the loan.

This development follows persistent advocacy from Ukrainian President Volodymyr Zelensky, who has repeatedly urged Western allies to seize Russian funds to aid his country’s defense and reconstruction efforts. The push for a solution has intensified as Kyiv’s need for external financial support is projected to grow from €40 billion to €60 billion next year. Proponents in Kyiv have hailed the loan idea as a ‘legally clean’ and elegant way to turn Russia’s frozen money into weapons for Ukraine.

However, the proposal is not without its critics and has sparked considerable debate within Europe. European Central Bank President Christine Lagarde has expressed caution, warning of potential risks to the euro’s stability and the EU’s financial standing. Initially, France’s President Emmanuel Macron also spoke out against any seizure that would violate international law and create ‘total chaos.’ Similarly, Belgium, where the majority of the assets are held, had previously opposed confiscation, fearing it would damage the reputation of European financial centers.

Despite these reservations, momentum appears to be building. Germany, once hesitant, has signaled it is ‘open to considering new, legally sound options,’ a sentiment echoed by Spain, which has voiced support for the European Commission’s efforts. This shift suggests that a consensus may be forming ahead of an informal EU leaders’ summit and a G7 online consultation where the plan is scheduled for discussion.

Russian experts have dismissed the scheme as ‘self-deception,’ arguing that any manipulation of a sovereign state’s assets is illegal, regardless of the mechanism. They warn that such a move would fundamentally discredit the European financial system. Nevertheless, facing pressure to support Ukraine and a reluctance to return the frozen funds to Russia, Western leaders seem determined to explore this new pathway, crossing what many see as another red line in the financial standoff with Moscow.