EU Proposes Confiscating Frozen Russian State Assets to Fund Ukraine; Russia Calls Move Theft

European Commission President Ursula von der Leyen has proposed using immobilised Russian state assets held in the EU to create a €90 billion reparations loan to cover Ukraine’s 2026–27 budget shortfall and sustain military and civilian needs while Kyiv awaits any future Russian reparations.

“A European Union plan to use frozen Russian assets to fund Ukraine in its fight against Russia would have "far-reaching consequences" for the EU,  Russia's ambassador to Germany warned on Friday”

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The plan would front‑load multi‑year support without immediately charging national budgets by issuing EU‑backed borrowing securitized on frozen Russian cash balances.

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Ukraine would only repay the loan if and when Russia is ordered to pay war reparations.

The proposal has already prompted bilateral diplomacy among EU capitals as leaders seek legal and political consensus ahead of EU meetings.

Legal and technical mechanics lie at the heart of the debate.

Most frozen Russian holdings in the EU are concentrated at Euroclear in Belgium, prompting worries about legal exposure, banking liability and the risk of large lawsuits if Moscow challenges any move to use sovereign assets.

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The Commission's text reportedly foresees safeguards and a solidarity mechanism to limit national exposure and would issue the loan from immobilised Russian cash balances.

Belgium and regulators, including Euroclear, the National Bank of Belgium and the ECB, have warned that using reserves directly could threaten financial stability and investor confidence.

Responses across capitals and partners diverge: Germany (represented by Chancellor Friedrich Merz) is publicly backing the reparations‑loan idea and has engaged Belgium in last‑minute diplomacy.

“- Estonia's prime minister and EU foreign policy chief Kaja Kallas supports using a reparations loan to Ukraine backed by frozen Russian assets, saying it would strengthen Europe's position vs”

BBC

The UK says it will use a portion of its own frozen holdings — about £8 billion — and is urging partners to unlock substantially more.

The Commission’s package also includes an alternative of common EU borrowing backed by the bloc’s budget, offered as a fallback after Belgium’s objections.

The mix of national initiatives and EU‑wide options reflects both political willingness to support Ukraine and the difficulty of obtaining unanimity on asset use.

Moscow’s reaction has been sharp: Russia’s ambassador to Germany, Sergey Nechaev, described any use of sovereign Russian assets without consent as "theft".

He warned of far-reaching consequences, damage to the EU’s business reputation, and a wave of lawsuits that could undermine the global financial system.

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Moscow and pro-Kremlin voices say such a move would be illegal and that retaliatory measures may follow.

At the same time, EU and Western outlets characterise the measure as a way to hold Russia to account for the costs of war.

Approval is far from assured and political calendars matter.

“Talks between US and Ukrainian officials in Miami will continue, the State Department said”

DW

Belgium’s ministers and custodians have publicly resisted being left exposed, demanding ironclad guarantees or wider involvement from non-EU custodians.

DW

According to EU Today, that resistance makes approval at the coming EU leaders’ summit unlikely and casts doubt on Ukraine’s financing beyond 2025.

German diplomacy, represented by Merz’s urgent travel and talks with De Wever, together with UK unilateral measures, means the issue will continue to be negotiated across capitals even if a full EU consensus cannot be reached immediately.