The European Union's ambitious plan to leverage frozen Russian central bank assets to secure a €90 billion loan for Ukraine has hit a double wall of resistance. Reports that the United States lobbied several EU member states to block the proposal—arguing that immobilized assets should remain intact as leverage for future peace negotiations—have landed just as internal EU opposition hardens. Belgium, home to the bulk of the frozen reserves, continues to press for ironclad legal indemnities, while Hungary appears poised to exercise its veto power when EU leaders convene later this month to decide the plan's fate.
The collision sets up a stark choice for European capitals: mutualize the legal and financial risk to unlock unprecedented support for Ukraine through 2027, or retreat to conventional borrowing and diminishing interest-income streams that fall short of Kyiv's needs. At stake is not only the scale of Ukraine's wartime financing but also the coherence of Western strategy on one of the war's most contentious policy fronts—how to operationalize roughly €183 billion in Russian sovereign reserves held at Belgium's Euroclear clearinghouse, part of an estimated €290 billion frozen across EU jurisdictions.
The reparations loan mechanism
The EU proposal under discussion structures the loan as a "reparations loan": Ukraine would receive €90 billion to cover economic reconstruction and military requirements for 2026 and 2027, with repayment obligations triggered only once Russia pays legally grounded reparations. The architecture is designed to avoid outright seizure of sovereign principal—a move that would collide with sovereign immunity doctrines and international law—while still translating immobilized assets into immediate Ukrainian purchasing power.
Two technical pathways have emerged from legal and policy analysis. The first would channel Euroclear's cash balances, which accumulate on matured Russian bonds at zero interest, into a special-purpose vehicle backed by EU guarantees and ultimately secured against future reparations claims. The second would invest the immobilized balances in a conventional bond portfolio and use the income stream to service an EU bond issued to fund Ukraine—creating greater legal distance from the frozen principal but requiring larger EU market issuance and more complex financial plumbing.
Both approaches build on existing infrastructure. The G7's "extraordinary revenue acceleration" facility, launched in early 2025, advanced future interest income from Euroclear and other depositories to provide the United States with approximately $20 billion and the EU with roughly €18 billion in near-term support. EU regulatory changes have also redirected Euroclear's interest windfalls—which generated €2.7 billion in the first half of 2025 and €3.9 billion in the third quarter of 2025 from Russian sanctioned assets, declining by 21 percent in the first half of 2025 due to ECB rate cuts that began in March—to Ukrainian aid. Yet these flows, while symbolically important, remain insufficient in scale and politically fragile, leaving Brussels searching for a mechanism that can mobilize the principal stock without legally confiscating it.
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Transatlantic divergence on leverage theory
The reported U.S. lobbying effort, sourced to European diplomats speaking to Bloomberg, reflects a different theory of leverage. Washington's position holds that keeping the principal intact preserves a bargaining chip for future peace negotiations—essentially, that Russia might be induced to make concessions in exchange for unfreezing its reserves. This approach treats the assets as a static store of value whose utility lies in their potential release, not their immediate mobilization.
Brussels, by contrast, sees the assets as a dynamic tool to address Ukraine's near-term financing gap without waiting for a settlement that may be years away or never materialize on acceptable terms. The divergence has been sharpened by reports that U.S. officials have explored alternative concepts, including a potential joint U.S.–Russia investment vehicle, which European leaders view as encroaching on EU governance of assets held on European soil. The transatlantic friction over frozen assets adds another layer of uncertainty to a policy debate already burdened by legal complexity and internal EU resistance.
The December decision tree
EU leaders face a binary choice at their upcoming summit. Approving the reparations loan would require not only legal scaffolding but also political consensus on collective indemnities robust enough to satisfy Belgium and creative enough to sidestep Hungary's veto—perhaps through Article 122 or other emergency provisions. Failure to agree would leave the EU reliant on conventional market borrowing supplemented by the dwindling stream of interest income from Euroclear, a combination that falls well short of Ukraine's €90 billion requirement for the next two years.
The stakes extend beyond financing. Mobilizing frozen assets would signal that the West can translate economic statecraft into tangible support without crossing into outright confiscation. Walking away would hand Moscow a talking point—that European institutions lack the capacity to follow through on their rhetoric—and deepen Ukraine's dependence on ad hoc bilateral assistance. The legal, financial, and political obstacles are real, but so is the cost of inaction.
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