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European leaders opt for loans over plans to use frozen Russian assets for Ukraine
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European leaders opt for loans over plans to use frozen Russian assets for Ukraine

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European Union leaders decided Friday to borrow cash to finance Ukraine’s defense against Russia over the next two years, rather than using frozen Russian assets. In doing so, they avoid divisions over an unprecedented plan to finance Ukraine with Russian state money.
“Today we approved a decision to provide 90 billion euros (about $159.5 billion) to Ukraine,” EU President Antonio Costa told a news conference early Friday morning after hours of talks between leaders in Brussels.
“We will urgently provide a loan supported by the European Union budget,” he said.
Leaders also mandated the European Commission to continue working on a so-called recovery loan based on Russian immobilized assets, but that option proved unworkable for the time being, mainly due to resistance from Belgium, where most of the assets are held.
The idea of ​​EU borrowing initially seemed unworkable because it would require unanimity, and Hungary’s Russian-friendly Prime Minister Viktor Orbán had opposed it. But Hungary, Slovakia and the Czech Republic agreed to go ahead with the plan as long as it did not affect them financially.

EU leaders said Russian assets, totaling 210 billion euros in the EU, will remain frozen until Russia pays reparations to Ukraine. If Russia were ever to take such a step, Ukraine could use the money to repay the loan.

‘There were so many questions’

“This is good news for Ukraine and bad news for Russia and this was our intention,” German Chancellor Friedrich Merz said.
The stakes in finding money for Ukraine were high because, without the EU’s financial help, the country would run out of money in the second quarter of next year and would most likely lose the war to Russia, which the EU fears would increase the threat of Russian aggression against the bloc.
The decision follows hours of discussions between leaders over the technical details of an unprecedented loan against Russia’s frozen assets, which proved too complex or politically demanding to resolve at this stage.

The main difficulty was to provide Belgium, where 185 billion euros of total Russian assets in Europe are held, sufficient guarantees against the financial and legal risks of possible Russian retaliation for the release of the money to Ukraine.

“There were so many questions about the recovery loan, we had to go to Plan B. Rationality has prevailed,” Belgian Prime Minister Bart De Wever said at a press conference. “The EU has avoided chaos and division and remained united,” he said.
With public finances across the EU already under pressure due to high debt levels, the European Commission had proposed using the Russian assets for a loan to Kiev or joint loans charged to the EU budget.
By using the latter option, Orbán could claim a diplomatic victory.

“Orbán got what he wanted: no recovery loan. And EU action without the participation of Hungary, the Czech Republic and Slovakia,” said an EU diplomat.

‘I can’t afford to fail’

“We simply cannot afford to fail,” said Kaja Kallas, the European Union’s foreign policy chief.
Ukrainian President Volodymyr Zelenskyy, who took part in the summit, urged the bloc to agree to use Russian resources to provide the funds he said would allow Ukraine to keep fighting.

“The decision now on the table – the decision to fully utilize Russian resources to defend against Russian aggression – is one of the clearest and most morally justified decisions that can ever be made,” he said.

“If this decision is not taken now, the Russians – and not only them – will feel that Europe can be defeated.”
Russia’s central bank has said the EU’s plans to use its assets were illegal.
It filed a lawsuit in Moscow this week seeking US$230 billion ($348 billion) in damages from clearing house Euroclear.

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