Introduction
The European Union is preparing to debate one of its most ambitious and legally complex financial initiatives: using frozen Russian state assets to fund Ukraine’s long-term financial and military needs. As Ukraine faces mounting economic pressure and growing uncertainty about future Western aid, the European Commission has proposed a sweeping plan anchored on leveraging more than €200 billion of immobilized Russian sovereign reserves held in Europe.
The proposal, led by Commission President Ursula von der Leyen, is strategic, controversial, and unprecedented in modern international finance. It aims to provide Ukraine with a stable funding mechanism for 2026–2027 but it also risks setting new precedents in international law, sovereign immunity, and central-bank asset protection.
While many EU leaders support finding new methods to sustain Ukraine financially, others warn of profound economic and legal consequences. And at the center of this debate is one country: Belgium, home to Euroclear, the clearing house that holds nearly all the frozen Russian assets in Europe.
The Funding Proposal: A €90 Billion Package for Ukraine
The European Commission’s plan seeks to supply Ukraine with €90 billion for the 2026–2027 period, covering approximately two-thirds of what the IMF estimates Ukraine will need to sustain government services, military operations, and reconstruction efforts. The IMF places Ukraine’s financial requirement at €135–€137 billion over these two years.
Using Frozen Russian Assets as Collateral
The EU froze more than €210 billion in Russian Central Bank assets after the 2022 invasion of Ukraine. Most of these funds roughly €194 billion sit in Euroclear, headquartered in Brussels.
Rather than confiscating the assets outright, the Commission proposes a more legally defensible mechanism.
How the “Reparations Loan” Would Work
Von der Leyen’s preferred structure is a reparations-linked loan , a hybrid financial model designed to avoid breaching international laws on sovereign immunity.
Step 1: The EU Raises Funds on Capital Markets
The EU would issue debt much like it did for the COVID-19 recovery fund raising the €90 billion for Ukraine.
Step 2: Frozen Russian Assets Serve as Collateral
Instead of seizing Russian assets, the EU would use them as security for the loan. Legally, this is not framed as confiscation but as a “countermeasure” responding to Russia’s violation of international law.
Step 3: Ukraine Repays Only if Russia Pays Reparations
Ukraine’s repayment obligation would be conditional:
- If Russia pays war reparations in the future, the funds would be used to repay the EU loan.
- If Russia refuses, the Russian assets would remain immobilized indefinitely to cover EU liabilities.
This design is intended to distribute financial risk of the loan while preserving legal arguments that the assets are not being appropriated, but used as leverage.
Why the EU Avoids Direct Confiscation
Seizing another country's central-bank assets outright would:
- Violate long-standing norms of sovereign immunity
- Trigger retaliatory actions against EU assets abroad
- Expose the EU to legal battles in international courts
Thus, the reparations-loan model attempts to chart a path between legality, practicality, and political necessity.
Belgium’s Opposition: The Main Roadblock
The most significant obstacle to the plan is Belgium, whose banking and financial system would bear disproportionate risk.
Euroclear’s Role
Euroclear, based in Brussels, is the custody and settlement institution holding the majority of Russian sovereign assets in Europe. This puts Belgium in a uniquely risky position.
Belgium’s Concerns
Belgium’s Foreign Minister has criticized the reparations loan model as “the worst of all options.” Their objections focus on:
1. Legal Exposure
If Russia challenges the loan in international courts, Belgium not the EU could be targeted because Euroclear is the primary custodian of the assets.
2. Financial Liability
If the frozen assets lose value or if Russia retaliates, Euroclear and the Belgian state may face massive losses.
3. Lack of Collective Guarantees
Belgium insists that:
- All 27 EU member states must share liability
- The EU must jointly guarantee legal and financial risks
- Belgium should not be left “holding the bag”
Belgium’s Preferred Alternative
Belgium supports funding Ukraine through traditional EU borrowing, backed by the EU’s long-term budget similar to the financial structure used for COVID-19 relief programs.
Belgium argues that:
- It is a proven, legally sound mechanism
- It avoids unpredictable litigation
- It distributes responsibility evenly across all EU members
This approach would sidestep the risks associated with Russian assets but would rely more heavily on EU taxpayer obligations.
Why the EU Is Pushing This Plan
The Commission argues that the reparations-loan model:
- Is legally defensible as a countermeasure
- Places financial responsibility on Russia rather than EU taxpayers
- Aligns the funding with the principle of “Russia must pay for what it has destroyed”
- Provides Ukraine with medium-term funding stability
- Avoids direct asset seizure, which could cause global financial backlash
Additionally, the EU is under growing pressure as U.S. political divisions delay American financial assistance to Ukraine.
Broader Risks and Global Implications
1. Impact on Euroclear and European Financial Stability
Euroclear fears lawsuits, asset freezes abroad, or countermeasures from Russia, which could undermine global trust in EU financial custodians.
2. Precedent for Sovereign Asset Use
Using frozen central-bank assets as loan collateral is unprecedented. Other states may fear their reserves are no longer safe in European institutions.
3. Uncertain Legal Ground
While the Commission frames this as a countermeasure, legal scholars warn:
- Courts could rule the collateralization constitutes de facto confiscation
- It may violate norms of central-bank immunity under international law
4. EU Political Unity at Stake
Any measure involving the EU budget or joint funding requires unanimous approval. Belgium’s resistance could block the proposal entirely.
Next Steps: The December Summit
EU leaders will discuss the proposal at the December 18–19 European Council summit. Key decisions include:
- Whether to adopt the reparations-loan model
- Whether to pursue Belgium’s alternative financing
- Whether all 27 states will accept shared liability
- How quickly funds can be mobilized to avoid a Ukrainian budget crisis
The Commission warns that delays could create a severe funding gap for Ukraine in early 2026.
Conclusion
The EU’s proposal to use frozen Russian assets is one of the most politically sensitive and legally complex initiatives the bloc has attempted in decades. While the plan aims to make Russia pay for its actions and secure long-term support for Ukraine, it exposes the EU and Belgium in particular to substantial legal and financial risks.
As the December summit approaches, EU leaders must weigh these risks carefully against Ukraine’s urgent needs, the geopolitical stakes of the war, and the stability of Europe’s financial system. The outcome will shape not only Ukraine’s future, but also global norms on sovereign assets, wartime reparations, and international financial governance.
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