European Union leaders have reached a critical decision to provide Ukraine with a substantial interest-free loan of €90 billion ($160 billion) to support its military and economic needs over the next two years. The agreement, however, does not include the use of frozen Russian assets, a contentious point that had initially been proposed to fund the loan.
The decision comes as Ukraine faces severe financial challenges, with the International Monetary Fund estimating that the country will require €137 billion ($242 billion) in 2026 and 2027. Kyiv is teetering on the brink of bankruptcy and urgently needs financial assistance by the spring of the Northern Hemisphere.
Frozen Russian Assets: A Missed Opportunity
The initial plan to utilize some of the $372 billion worth of Russian assets frozen in Europe, predominantly in Belgium, fell through due to disagreements within the EU. Efforts to bridge differences with Belgium, which was concerned about potential legal and financial repercussions, proved unsuccessful.
EU leaders worked late into Thursday night attempting to reassure Belgium by offering guarantees to protect it from Russian retaliation if it supported the “reparations loan” plan. Despite these efforts, the leaders ultimately decided to raise the necessary funds by borrowing on capital markets.
“We have a deal. Decision to provide 90 billion euros ($159 billion) of support to Ukraine for 2026–27 approved. We committed, we delivered,” EU Council president Antonio Costa announced on social media.
European Leaders’ Reactions
French President Emmanuel Macron hailed the agreement as a major advancement, describing the chosen option as “the most realistic and practical way” to fund Ukraine’s needs. The deal includes a mechanism to safeguard Hungary, Slovakia, and the Czech Republic from any adverse financial impacts.
German Chancellor Friedrich Merz expressed satisfaction with the outcome, emphasizing that Ukraine will receive a zero-interest loan, sufficient to cover its military and budgetary needs for the coming two years. Merz also noted that the frozen Russian assets would remain blocked until Russia agreed to pay war reparations to Ukraine, which Ukrainian President Volodymyr Zelenskyy estimates at over $1.06 trillion.
“If Russia does not pay reparations, we will — in full accordance with international law — make use of Russian immobilised assets for paying back the loan,” Merz stated.
Opposition and Concerns
Not all EU member states supported the loan package. Hungary, Slovakia, and the Czech Republic expressed opposition, though they did not obstruct the agreement. Hungarian Prime Minister Viktor Orbán, known for his close ties with Russian President Vladimir Putin, voiced his concerns, stating, “I would not like a European Union in war. To give money means war.”
Orbán also criticized the rejected plan to use frozen Russian assets as a “dead end.” Meanwhile, Polish Prime Minister Donald Tusk underscored the urgency of the situation, warning that it was a matter of sending “either money today or blood tomorrow” to aid Ukraine.
Legal and Financial Implications
Belgium’s objections to the loan plan centered on legal risks and potential harm to Euroclear, a Belgian financial clearing house where most of the frozen Russian assets are held. The situation was further complicated when Russia’s Central Bank filed a lawsuit against Euroclear to prevent any loan to Ukraine using these assets.
“For me, the reparations loan was not a good idea,” Belgian Prime Minister Bart De Wever remarked. “We avoided stepping into a precedent that risks undermining legal certainty worldwide.”
Despite these challenges, EU Council president Costa affirmed the union’s right to potentially use the immobilized assets to repay the loan in the future, signaling a strong political stance in support of Ukraine.
As the EU moves forward with its financial commitment to Ukraine, the situation remains dynamic, with ongoing geopolitical tensions and economic uncertainties shaping the landscape. The decision to fund Ukraine through capital markets reflects a pragmatic approach amid complex international legal and diplomatic considerations.
