EU considers providing Ukraine with 'reparations loan' of EUR 130 bln from Russia's frozen assets

The European Union's "reparations loan" for Ukraine could amount to up to EUR 130 billion, with the amount of the loan to be finally determined after the International Monetary Fund assesses Ukraine's financial needs in 2026 and 2027, Reuters reports, citing EU officials close to the negotiations.

"The idea of a reparations loan to Kyiv, based on cash balances of Russian assets immobilised in the West after Moscow invaded Ukraine in 2022, was floated by European Commission President Ursula von der Leyen on September 10. The loan, aimed at helping Kyiv fund its war effort, would be repaid by Ukraine only once it receives reparations from Russia in a peace accord. The risk would be carried collectively by European and possibly also some other G7 countries, she said. Most of the roughly 210 billion euros worth of Russian assets held in Europe are in Belgian central securities depository Euroclear. Officials said 175 billion euros of the assets in Euroclear have now matured and become cash that could be the basis of the new loan. But officials said that before the EU would move ahead with the reparations loan, it would want to repay the 45 billion euro ($50 billion) G7 loan agreed last year."

The new instrument would leave about EUR 130 billion of the remaining cash available for use, according to three officials close to the talks.

EU Economy Commissioner Valdis Dombrovskis said on Friday that the European Commission would decide on the size of the loan only after receiving an IMF assessment of Ukraine's financing needs over the next two years.

Senior EU finance ministry officials said the specific details had not yet been agreed. The Commission is working on a mechanism that would allow it to use frozen Russian assets without confiscating them – a red line for many EU governments and the European Central Bank.

The reparations lending mechanism would likely involve a special purpose vehicle to which frozen Russian funds from Euroclear could be transferred in exchange for zero-coupon bonds issued by the European Commission under guarantees EU and possibly G7 governments.