The fear hindering Ukraine's rescue: how EU struggles over Russian money

Following the European Union leaders’ summit on 1 October and the European Political Community meeting on 2 October in Copenhagen, many headlines, most notably in the Financial Times, summed up the outcome as "reparation loan plan fails."

These reports, along with a number of subsequent articles and opinion pieces, may have created the impression that the EU had lost the political will to pursue a loan plan secured by frozen Russian assets.

Yet a closer reading of the actual texts, beyond the headlines, shows that the idea has not failed.

On the contrary, it has now entered the technical, complex, and essential phase of agreeing on guarantees and legal architecture.

"What happens if Russia doesn’t pay back its debt?"

Ahead of the meetings, European Commission representatives, speaking at various venues and levels, outlined the core elements of their proposed approach: providing Ukraine with a loan of approximately €140 billion, secured against the cash equivalent of Russian assets frozen in the Euroclear system in Belgium.

The plan is to lend Ukraine the money now, using these assets as pledge. If, after the war, Russia refuses to pay reparations, it will forfeit its right to recover these assets.

During a brief discussion of the plan at the 1 October summit, several EU leaders expressed support for the general principle but asked the Commission to finalise its legal and fiscal implications.

As a result, according to the Financial Times, progress has been described as "stalled," making it unlikely that a fully developed formal proposal will be ready by the EU summit in Brussels on 23–24 October.

However, this does not mean the work has stopped. On the contrary, the process has now entered its most sensitive stage: assessing the specific risks should Russia attempt to challenge the mechanism.

Euroclear, the financial institution holding roughly €185 billion in assets of the Russian Central Bank, is based in Belgium. Prime Minister Bart De Wever has therefore insisted that the EU "share the risks" and provide Belgium with additional legal protection as a sovereign state in the event of a lawsuit by Russia.

In other words,

the Belgian government is unwilling to remain the sole defendant if legal claims are brought.

France and Luxembourg have echoed this concern, wary of setting a dangerous precedent for their own financial systems, as they hold €18 billion and €10 billion of Russian assets, respectively.

Luxembourg’s Prime Minister, Luc Frieden, put it most bluntly: "You can’t just take something that belongs to another country. What happens if Russia doesn’t pay back the debt?"

These legal reservations do not amount to abandoning the idea. Rather, they underscore that without a proper insurance framework–both legal and financial–the mechanism cannot secure final approval.

"The risk must be on our shoulders"

After the summit, European Commission President Ursula von der Leyen set out the next steps with unusual clarity: "We need to develop a much more detailed proposal. It is absolutely clear that the risk must be on our shoulders."

This key phrase captures the essence of the entire discussion: Europe acknowledges the need for shared responsibility within the framework of the reparation mechanism. The Commission’s task now is to design a framework that distributes risks proportionally across all 27 member states–or at least among a "coalition of the willing."

In practice, this points to the creation of a mutual guarantee mechanism.

It should be something similar to the joint bonds issued under the COVID-19 recovery fund (NextGenerationEU). One option under consideration is to provide guarantees proportional to the GDP of the participating countries.

That is why, as the Financial Times noted, the Commission has not stopped its work but instead received "constructive feedback." Even Belgium, despite its initial reservations, agreed to "continue working on this issue."

It is also worth noting the coordinated statement issued by the G7 finance ministers following their virtual meeting on 1 October.

In it, the G7 members reaffirmed their readiness "to use in a coordinated manner the full value of Russian sovereign assets frozen in our jurisdictions to ensure a just and lasting peace in Ukraine."

This is a significant signal. If the G7 countries were to join the guarantee system or participate in risk-sharing, many of the legal and financial concerns within the EU would be substantially alleviated.

In practical terms, this already reflects a move toward the concept of a "coalition of the determined," in which the EU, the United States, Canada, Japan, and the United Kingdom act together.

The aim is not for all 27 EU member states to agree simultaneously, but for a group of key economies to establish a guaranteed financial instrument backed by part of the frozen assets.

There are also proposals to involve international financial institutions in shaping this architecture.

Next steps

What the Financial Times described as "the failure to move forward" is, in fact, a transitional phase.

For the first time in history, the EU is attempting to design a legal framework that simultaneously incorporates the principle of aggressor responsibility under international law, safeguards financial stability and confidence in the euro, and manages collective risk-sharing among member states. Such an architecture cannot be built in a single summit.

The coming weeks will therefore be devoted to legal and financial refinements to avoid outcomes that could later be blocked by the European Central Bank or the Court of Justice of the European Union.

For Ukraine, this moment should not be seen as a setback but as an opportunity for diplomatic acceleration. The issue must remain visible in the public space, because the reparations loan is not merely a financial instrument.

It is also a political signal that Europe is ready to shift from "aid" to "aggressor responsibility."

At the same time, active engagement with the governments of Belgium, France, and Luxembourg is essential, as the future legal shape of the mechanism will be decided there. Equally important is the involvement of G7 partners and international financial institutions as guarantors.

If the United States, Canada, and/or the IMF agree to assume that role, it could pave the way for political consensus within the EU and transform the current technical phase into the actual launch of the reparations loan.

The Copenhagen summit did not bury the idea of a reparations loan. On the contrary, it marked another step toward its realization. The EU has acknowledged that the question is no longer whether frozen assets should be used, but how to employ them in a way that avoids legal risks and protects financial stability.

This path requires complex negotiations and financial as well as political agreements–both within the European Union and across the wider Western alliance.

For Ukraine, the key message is clear: the game is still on.

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."