The European Union is considering a plan to use about €200 billion in frozen Russian assets as a loan mechanism for Ukraine, allowing Kyiv to access the funds now and repay them only after Russia pays war reparations, officials and lawmakers say.
The proposal, first outlined last year by British analyst Hugo Dixon, lawyer Lee Buchheit, and US economist Daleep Singh, envisions transforming frozen Russian state assets into what they call a “reparations loan”. The money would remain under Russian ownership but serve as a financial guarantee for Ukraine until Moscow compensates for the damage caused by its full-scale invasion.
“This would be an initial down payment on the Kremlin’s obligation to pay for the war damage,” Dixon said at the time.
Germany and France have long opposed outright confiscation of the assets, a stance also shared by the European Central Bank, but momentum is growing for the loan alternative. German Chancellor Friedrich Merz recently backed the idea in a commentary for the Financial Times, arguing that it would provide Ukraine with nearly €140 billion in interest-free financing without breaching property rights.
“In my view a viable solution should now be developed whereby – without intervening in property rights – we can make available to Ukraine an interest-free loan of almost €140 billion in total,” Merz wrote. “That loan would only be repaid once Russia has compensated Ukraine for the damage it has caused during this war.”
The use of frozen Russian assets is expected to be a central topic at this week’s informal European Council meeting in Copenhagen.
European Commission Vice President Valdis Dombrovskis, of Latvia, said the approach could satisfy all sides. “Confiscation would require unanimity, and some member states oppose it. The ECB is also sceptical. But this loan mechanism would help Ukraine without undermining financial stability,” he told Baltic journalists last week.
Russia is estimated to have around $300 billion in frozen assets worldwide, with about €210 billion held in Western Europe. Much of that is parked in Euroclear, the Brussels-based securities depository, which has resisted confiscation due to legal and reputational risks.
The EU has so far only tapped the interest generated by these frozen funds.
Lithuanian European Parliament member Petras Auštrevičius said the loan mechanism could be a way out of the legal and political deadlock. “Ownership would remain Russian, but the money could be used for Ukraine until Russia pays reparations. International law allows this,” he said. “Those €300 billion could cover Ukraine’s needs for the next three years.”
Ukraine currently requires around €100 billion in external support annually, with more than half its state budget funded by international aid. EU members have committed €173 billion so far – more than the United States – but doubts remain about long-term financing.
The debate comes as Ukraine faces mounting reconstruction costs while struggling with export restrictions on key goods to the EU and amid warnings that its debt sustainability is at risk.
The European Court of Human Rights recently ruled Moscow responsible for the downing of flight MH17 in 2014, a precedent that Auštrevičius said could open the door for individuals to claim compensation from Russia.
This verdict paves the way for asset seizures to benefit victims of Russian aggression, he said: “Private Ukrainians who have lost homes, family members and so on can now, like the Dutch, demand compensation from Russia.”
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