The European Union is advancing plans to utilize frozen Russian central bank assets to provide financial aid to Ukraine. This initiative aims to address Ukraine's significant funding gap, estimated at €135.7 billion over the next two years for its military and economy.
Background on Frozen Assets
Approximately €210 billion of Russian state assets are currently immobilized within the EU. Of this total, an estimated €185 billion is held by Euroclear, a Belgium-based financial services company.
Ukraine's President Volodymyr Zelensky and EU officials advocate for using these assets for Ukraine's reconstruction, referring to the proposed financial support as a "reparations loan." German Chancellor Friedrich Merz has stated that these assets would enable Ukraine to defend itself against future attacks.
Russian Opposition and Legal Action
Russian officials have characterized the EU's plan as an act of "theft." Russia's central bank initiated legal proceedings against Euroclear in a Moscow court on Friday, prior to a final EU decision on the matter.
EU Proposals and Belgian Concerns
The EU is considering two primary proposals to provide Ukraine with €90 billion:
- Capital Market Funding: Raising funds on capital markets, guaranteed by the EU budget. This option is favored by Belgium but requires unanimous approval from EU leaders, a challenge due to objections from countries like Hungary and Slovakia regarding military funding for Ukraine.
- Loan from Frozen Assets: Utilizing the approximately €185 billion in Russian assets held by Euroclear. These assets, initially in securities, have largely matured into cash and are held in the European Central Bank.
Belgium has expressed significant concerns about the legal and financial risks associated with using the assets. Belgian Prime Minister Bart de Wever has stipulated conditions for approving the plan, citing potential liability for the Belgian state and Euroclear.
Key concerns include:
- Financial Liability: Belgium fears incurring a substantial financial burden if the plan encounters legal or economic complications. Veerle Colaert, a professor of financial law at KU Leuven University, highlighted that Belgium's GDP is around €565 billion, making a potential €185 billion liability a significant risk.
- International Financial System Stability: Euroclear CEO Valérie Urbain has cautioned that using these assets could destabilize the international financial system.
- Banking Regulation Compliance: Professor Colaert also suggested that requiring Euroclear to loan €185 billion, out of €227 billion on its balance sheet, to a single counterparty (the EU) might violate EU banking regulations concerning capital, liquidity, and diversification. Euroclear also has an estimated €16-17 billion of its own assets immobilized in Russia.
The European Commission has acknowledged Belgium's concerns and outlined proposed safeguards. These include offsetting any losses Euroclear might incur in Russia using assets belonging to Russia's clearing house in the EU, and a guarantee covering all €210 billion of Russian assets in the EU to protect Belgium from any Russian court rulings.
Recent Developments
EU ambassadors are expected to agree to indefinitely immobilize Russia's central bank assets in Europe. This would shift from the current system of requiring unanimous six-month renewals of the freeze. The decision is anticipated to invoke an emergency clause under Article 122 of the EU Treaties, allowing the assets to remain frozen as long as an "immediate threat to the economic interests of the union" persists.
International military aid to Ukraine has seen a decline in 2025, with Europe attempting to address shortfalls following reduced funding from the United States.