The European Union will meet on Thursday to discuss two main options for providing financial support to Ukraine, following a pledge by EU leaders to cover Ukraine’s needs for 2026-2027. The options are borrowing money or using frozen Russian assets, with the latter being the more likely choice according to a senior EU official. The European Commission is preparing an options paper, but it is not ready yet.
One option involves using frozen Russian assets, which Russia has claimed would be illegal and has threatened retaliation. Most of these assets are held in Belgium’s Euroclear, and since Russia’s invasion of Ukraine in February 2022, many securities have converted to cash. This plan, known as the Reparations Loan, would allow the EU to replace Russian cash with zero-coupon AAA bonds issued by the Commission. The cash would go to Ukraine, and repayment would only occur if Ukraine receives war reparations from Russia.
Under this model, EU governments would guarantee the Commission loans without significant financial risk since they manage when to release frozen assets. However, Belgium is concerned about potential liability in case of a successful lawsuit and is pushing for assurances that EU governments could cover costs quickly if needed. This raises concerns about mobilizing over 100 billion euros in a short timeframe.
The second option is for EU governments to borrow funds and provide them to Ukraine, but this is less appealing due to increased debt and the burden of annual interest payments on either Ukraine or the EU. The Commission is currently negotiating with Belgium to address its concerns before seeking support from EU leaders in December.
With information from Reuters