Conditions for helping Ukraine: under what circumstances will EU use Russian assets?

On 23 October, the European Council meeting in Brussels put a key question on its agenda: how to finance Ukraine in 2026-2027 and whether frozen Russian assets could be used for that purpose.

Despite at times emotional statements by some national leaders, the discussion produced neither a breakthrough nor a failure.

There is still no final decision on the "reparations loan," even though political will among EU member states now exists – something unimaginable a year ago.

The main obstacle remains the absence of an "ideal" legal solution.

The summit confirmed what has long been in the air: the arena is shifting from politics to law and finance. What now matters are not slogans and intentions, but formulas, guarantees and risks.

In search of the "perfect" solution

Among the most important outcomes of this European Council meeting is the instruction to the European Commission to present, by December, concrete options for financial support to Ukraine for 2026–2027.

This would be a long-term architecture to replace the current Ukraine Facility and add a defence component.

In its final conclusions of the summit, the European Council reaffirmed a long-standing formula: frozen Russian assets will remain under EU control until Russia compensates for the damage it has caused.

But the European Commission must develop a legally sound model for their possible use.

Separately, the leaders emphasised that support for Ukraine cannot be interrupted, and that preparations for 2026 funding must begin now to avoid any gap between current assistance programmes and the new instruments.

This is not a "stop," but a signal for systematic work: Europe is moving from political declarations to the legal and financial justifications for a new form of long-term support for Ukraine.

Fortunately, the main reason for the delay does not appear to be political. Today, the principal challenges to the necessary decisions lie in the legal, financial and economic spheres.

Belgium, where the Euroclear depository holds the bulk of Russia’s frozen assets (over €190 billion), is seeking guarantees that, in the event of lawsuits or Russian legal aggression, it will not be left de jure on its own.

Brussels, and ultimately the entire eurozone, cannot allow an international depository with trillions in client funds, including those of many leading economies, to come under sustained legal attack. Hence Belgium’s insistence on a common system of guarantees shared by all EU member states.

This stance reads not as sabotage, but as prudence from institutions charged with safeguarding the stability of Europe’s financial markets.

Moreover, the European Central Bank supports this approach: any decision must comply with international law and must not undermine confidence in the euro.

In short, Brussels has entered a legal pause – not issued a political refusal.

The IMF factor

A week before the European Council meeting, the annual meetings of the International Monetary Fund (IMF) and the World Bank took place in Washington. There, Valdis Dombrovskis, Executive Vice-President of the European Commission, presented the EU’s concept of a reparations loan.

This was a clear signal that the EU is prepared to assume long-term financial responsibility for Ukraine.

However, the United States stopped short of explicitly endorsing the use of Russian assets at that meeting. In practice, this means

the US is not yet ready to join a scheme that carries uncertain legal risk.

The US position carries particular weight. First, without American participation, the G7 cannot create a global framework of "shared responsibility." Second, the United States holds the decisive vote in the IMF, which is currently shaping a new programme for Ukraine.

According to participants in the negotiations, the Fund considers it advisable to adjust the exchange-rate regime, specifically, a gradual devaluation of the hryvnia to reduce pressure on reserves. This is an unpopular but economically realistic view reflecting the IMF’s expectation that Ukraine should increase domestic revenues and narrow its trade deficit.

This stance, and the uncertainty it introduced around the next IMF programme, amplified Belgium’s concerns and helped justify postponing a decision on the reparations loan.

Who controls the costs: Kyiv vs. Brussels

There are also ongoing discussions between Kyiv and Brussels over the oversight of loan spending.

Kyiv argues for maximum flexibility: funds should serve Ukraine’s priorities – from closing critical gaps in air defence to rapid procurement wherever availability and price are best, even outside the EU.

Kyiv also seeks to fold reconstruction, compensation for victims and critical infrastructure into the package.

European capitals, led by Paris, favour the "Europeanisation" of expenditures.

This would channel funds primarily into contracts with the EU defence industry, under joint oversight and with a measurable impact on European supply chains.

The Commission is seeking a new balance between these poles: predominantly European contracts, with a defined corridor of flexibility for non-European purchases that meet Ukraine’s urgent defence needs.

Accordingly, the December decision should enshrine a formula in which Ukraine’s flexibility coexists with European interests.

By the December summit, the European Commission should present concrete, legally sound options to turn the idea of a reparations loan into an operational mechanism.

This is not only about technical design but about a coherent financial architecture: how to distribute risk across all EU member states without eroding investor confidence and how to ensure that the use of frozen Russian assets is both lawful and effective.

Several areas of work are already taking shape in Brussels. What might they be?

First, designing a system of joint guarantees to address, not merely allay, the concerns of Belgium, France and Luxembourg, shifting the issue from a national risk to a collective EU-backed solution.

Second, finalising a new generation of debt instruments, reparations bonds, potentially involving the European Investment Bank or the European Stability Mechanism, with partial backing from interest income on the remaining frozen Russian assets.

Third, bringing G7 partners – above all the United States, Canada and Japan – into the design of the reparations loan so the mechanism has a genuinely global, not just European, dimension.

Finally, developing a fallback plan, for example by expanding the current G7 ERA Loan programme, which is already financed by income from those assets.

For Ukraine, this period will be a test of diplomatic and institutional maturity.

Kyiv will have to work on several tracks at once.

Yes, there must be a clear, methodical development of the legal framework for the reparations loan with the European Commission. Work with the IMF should focus on the macroeconomic logic of the new programme, particularly on devaluation, inflation and the exchange rate. In parallel, Kyiv must engage the United States on G7 participation in the financial architecture of the reparations loan.

At the same time, the government needs a "plan B": a standby financing line that ensures stability if the "big loan" is again delayed in procedural labyrinths.

These contingencies could include bilateral grants and loans, expansion of existing programmes, especially the ERA Loan or a substantial increase in financing under the new IMF programme.

* * *

Brussels did not say "no," but it did not say "yes" either. Europe agreed to move forward with maximum legal precision and financial caution.

The reparations loan is shifting from politics to precise calculations, risk management, and a careful balance of interests. It is time for Kyiv to act (proactively, with European partners) to craft a structure in which law, interests and geopolitics operate without contradiction in Ukraine’s favour.

December will test the institutional capacity of both the European bureaucracy and the Ukrainian team.

If, by then, the EU can translate political intent into a concrete, legally formalised financial instrument, and Ukraine can align its needs with its parameters, the European community will have built a solid, long-term foundation of strength for victory.

Serhiy Verlanov,

Member of the Board of the Dnistrianskyi Center,

Head of the State Tax Service (2019-2020)

This material was prepared with the support of the International Renaissance Foundation as part of the project "#Compensation4UA / Compensation for War Damages to Ukraine. Phase V: Interim Reparations for Victims of Russian Aggression against Ukraine – Exploring Approaches, Needs and Solutions."