EU meet underway to decide whether to use Russia’s frozen assets to fund Ukraine’s defence: Check who’s against

Under the current proposal, the EU would raise money by issuing bonds backed by the value of frozen assets instead of confiscating them. Under the proposed structure, Ukraine would be required to repay the loan to the EU only if and when Russia pays war reparations, reported by Kyiv24.

Speaking in the European parliament on the eve of the summit, the European Commission president, Ursula von der Leyen said: “There is no more important act of European defence than supporting Ukraine’s defence.” She added that “the next days will be crucial in securing this”.

Von der Leyen said Europe must take responsibility for its own security in a world she described as “dangerous and transactional”, adding: “This is no longer an option. It is a must.”

EU nations divided over usage of Russia’s frozen assets

Belgium, which hosts most of the €210bn (£185bn) immobilised Russian assets in the EU, says it lacks sufficient guarantees that member states would come to its aid if the scheme were to fail, leaving Brussels with a multibillion-euro bill.

Italy has emerged as an important ally. The prime minister, Giorgia Meloni, said using Russia’s assets frozen in Europe to help Ukraine without a solid legal basis would hand Moscow “the first victory since the start of the war”. Like Belgium, Italy argues that joint EU borrowing would be a safer way of funding Ukraine.

“Italy, of course, considers sacred the principle that Russia should primarily pay for the reconstruction of the nation it attacked, but this result must be achieved with a solid legal basis,” Meloni told Italian politicians.

Germany’s chancellor, Friedrich Merz, said he would continue fighting to make up to €90bn (£79bn) in Russian assets “usable for Ukraine’s defence”. He put the odds of winning an agreement at “50/50” in an interview with public television on Tuesday.

Hungary’s government, which is hostile to Ukraine, has promised to veto any attempt to use the EU budget as collateral for a loan for Kyiv. By contrast, the reparations loan would require only a majority of EU member states, although some diplomats say it would be unthinkable to isolate Belgium.

EU officials involved in preparing the summit have suggested the reparations loan is the only real option, as use of the EU budget would require unanimity.

The European Commission, consisting of a college of 27 commissioners who lead the European Union’s executive branch. The commissioners consist of one member from each EU country and a President and Vice-President. The commission regulates specific policy areas, like trade, climate and justice.

What is the borrowing through Euroclear all about? 

The Russian central bank announced this week that it was seeking $230bn (£202bn) in damages against Euroclear, the Brussels-based securities depository that holds most of Russia’s sovereign wealth in the EU.

However, under the reparations loan, Euroclear would not directly lose the principal but Russia’s frozen funds would be replaced with EU issued bonds while the cash would directly go to Ukraine.

EU officials say Russia’s claim on the assets at Euroclear, frozen soon after the full-scale invasion in 2022, would not be affected. Moscow, however, argues the move amounts to theft and has vowed to retaliate.

The EU last week used emergency powers to indefinitely freeze €210bn of Russian assets in the bloc, averting the risk of losing control of the funds if Hungary or any other Kremlin-friendly government vetoed the renewal of sanctions, which have to be renewed every six months.

The European Union has sent €1.5 billion to Ukraine in 2024 using the extraordinary revenues obtained from the Russian Central Bank’s assets that remain immobilised as part of the bloc’s far-reaching sanctions.