European Leaders Face Choices on Funding Ukraine’s Defence with Frozen Russian Assets

As pressure mounts from the United States, European leaders are now being called upon to make crucial decisions about utilizing Russia’s frozen assets to bolster Ukraine’s defence. With an important summit taking place in Brussels, the stakes are higher than ever, as Ukraine faces ongoing territorial pressures amidst Russia’s military advances.

Critical Summit in Brussels

At the summit, EU leaders must act on their commitment to secure urgently needed funds for Ukraine. Polish Prime Minister Donald Tusk highlighted the gravity of the situation, stating, “We have a choice between money today or blood tomorrow.” He emphasized that this decision would impact not only Ukraine but also the broader security of Europe, urging all leaders to step up to the challenge.

Concerns Over Funding Approaches

Belgium’s Prime Minister, Bart De Wever, expressed reservations about a proposed “reparations loan” backed by frozen Russian assets, underscoring the need for protections against potential retaliation from Moscow. According to De Wever, the most feasible way to fund Ukraine may involve joint EU borrowing against unallocated EU budget funds. However, this suggestion has met resistance, particularly from Hungary, which has vowed to veto such a plan.

Support for a Frozen Assets Plan

German Chancellor Friedrich Merz, a strong proponent of leveraging frozen assets, remains optimistic that a consensus can be reached. “I understand the concerns of certain member states, especially Belgium, but I believe we can address these together,” he stated. Meanwhile, European Commission President Ursula von der Leyen affirmed her commitment to finding a solution, stressing the urgency of supporting Ukraine in the current geopolitical climate.

Von der Leyen’s Stance

In a statement to European lawmakers, von der Leyen described the support for Ukraine’s defence as “the most important act of European defence.” She further emphasized the necessity of Europe taking ownership of its security, noting that in today’s “dangerous and transactional” world, such measures are essential.

Legal Concerns Surrounding Asset Use

Recently, von der Leyen outlined two options for funding Ukraine’s pressing needs in 2026 and 2027: either through joint EU borrowing or a reparations loan backed by Russia’s frozen assets. Belgium, housing a significant portion of these immobilized assets, worries about the lack of guarantees if this initiative were to fail, potentially leaving Brussels with a substantial financial burden.

Italy’s Position

Italy’s Prime Minister, Giorgia Meloni, also weighed in, warning against proceeding with the use of frozen assets without a robust legal foundation, arguing that doing so would provide Moscow its first victory in the war. Like Belgium, Italy believes joint EU borrowing is a safer approach to financing Ukraine.

Prospects for Agreement

Chancellor Merz is committed to making up to €90 billion of frozen Russian assets accessible for Ukraine’s defence, with the probability of an agreement standing at approximately “50/50.” He stated this funding would sustain the Ukrainian military for at least the next two years, simultaneously delivering a message to Russian President Vladimir Putin. Merz acknowledged Belgium’s apprehensions, asserting a desire to collaborate with partners to mitigate these concerns.

Proposed Financing Scheme

The proposed framework involves the EU offering a €90 billion loan to Ukraine, financed by borrowing from Euroclear, with repayment contingent upon Russia compensating Ukraine for reparations. EU officials believe that Russia’s claims on these frozen assets would remain unaffected, although Moscow perceives this initiative as theft and has vowed to respond.

Challenges Ahead

According to EU officials preparing for the summit, the reparations loan is seen as the only viable option since any scheme utilizing the EU budget would require unanimous approval. Hungary’s opposition, which stems from its unfriendly stance towards Ukraine, poses significant hurdles. In contrast, the reparations loan would need only a simple majority from member states, making it more achievable, albeit fraught with its own complications.

Recent actions by the EU included using emergency powers to freeze €210 billion of Russian assets indefinitely, avoiding potential loss of these funds through vetoes from Hungary or other supportive nations. While Belgium has pondered using these emergency powers to facilitate a loan for Ukraine against the EU budget, doubts remain over its legality, with many viewing this as an impractical solution.

Conclusion

The upcoming summit serves as a pivotal moment for European leaders as they weigh the financial and political implications of providing support to Ukraine through Russian frozen assets. As discussions continue, the urgency and complexity of the situation demand careful consideration.

• EU leaders are pressured to use frozen Russian assets to fund Ukraine’s defence.
• Concerns about potential backlash from Russia have led to hesitance around certain funding proposals.
• Solid legal grounds are deemed necessary to avoid providing Russia a victory amidst the ongoing conflict.
• The situation remains fluid, with several proposed strategies facing significant political challenges.