EU leaders face key decision to lend Russian frozen cash to Ukraine

EU leaders begin two days of talks in Brussels that will take a major decision on whether to loan tens of billions of euros of frozen Russian assets to Ukraine to meet its military and economic needs.

Most of Russia’s 210 billion euros (£185 billion; $245 billion) worth of assets in the EU are held by the Belgium-based European Bank for Settlements, and so far Belgium and some other EU members have expressed opposition to the use of the cash.

Without an increase in funding, Ukraine’s finances will dry up within months.

One European government official said he was “cautiously optimistic, but not overly optimistic” about reaching a deal. Russia warns EU not to use its funds.

The company has filed a lawsuit against Euroclear in a Moscow court to recover the funds.

The Brussels summit comes at a critical moment.

US President Donald Trump said a deal to end the war – which began with Russia’s full-scale invasion of Ukraine in February 2022 – was “closer now than ever”.

While Russia has yet to respond to the latest peace overtures, the Kremlin has stressed that plans to form a European-led multinational force to Ukraine with U.S. support are unacceptable.

Russian President Vladimir Putin made his feelings about Europe clear on Wednesday, saying the continent was in a state of “total degradation” and that “European piggies” – a derogatory description of Ukraine’s European allies – hoped to profit from Russia’s collapse.

The European Commission, the EU’s executive arm, has proposed lending Kyiv around €90bn (£79bn) over the next two years, including €210bn of Russian assets in Europe.

This is roughly two-thirds of the 137 billion euros Kyiv needs in 2026 and 2027.

So far, the EU has provided Ukraine with interest on the cash, but not the cash itself.

“This is a critical moment for Ukraine to keep fighting next year,” a Finnish government official told the BBC. “Of course there are peace talks, but this gives Ukraine a reason to say ‘we are not desperate, we have the funds to keep fighting’.”

Commission chair Ursula von der Leyen said it would also increase Russia’s war costs.

Russia’s asset freeze is not the only option facing EU leaders. Another idea backed by Belgium is based on the EU borrowing money on international markets.

However, this would require a unanimous vote, and Hungarian Prime Minister Viktor Orban has made clear that he will not allow more EU funds to help Ukraine.

The coming days are important for Ukraine, with President Volodymyr Zelensky expected to attend an EU summit.

Ahead of the Brussels meeting, EU leaders were keen to highlight the significance of the decision.

“We know the urgency of the matter. The situation is very serious. We have all felt it. We have all seen it,” von der Leyen told the European Parliament.

German Chancellor Friedrich Merz, who has played a leading role in pushing for the use of Russian assets, told Germany’s Bundestag on the eve of the summit that it was to send a “clear signal” to Moscow that there was no point in continuing the war.

EU officials believe they have a good legal basis to use frozen Russian assets, but so far Belgian Prime Minister Bart de Wever remains unconvinced.

His defense minister, Theo Franken, warned ahead of the talks that lending cash to the European Bank for Settlements would be a big mistake.

Hungary is seen as the biggest opponent of the move, and ahead of the summit Prime Minister Orban and his entourage even suggested that plans to freeze assets had been removed from the summit agenda. A European Commission official stressed that this was not the case and that this would be a matter for the 27 member states at the summit.

Slovakia’s Robert Fico also opposed the use of Russian assets if it meant funds would be used to procure weapons rather than rebuilding needs.

When the crucial vote finally takes place, a majority of about two-thirds of member states is needed to pass it. Whatever happens, European Council President Antonio Costa has promised not to look beyond the Belgians.

“We will not vote against Belgium,” he told Belgian public broadcaster RTBF. “We will continue to work closely with the Belgian government because we do not want to approve something that may not be acceptable to Belgium.”

Belgium will also be aware that ratings agency Fitch has placed Euroclear Bank on negative watch, in part because the European Commission’s planned use of Russian assets poses “low” legal risks to its balance sheet. Euroclear’s chief executive also warned of the plan.

“Of course, there are still many problems and obstacles on the way. We have to find a way to respond to Belgium’s concerns,” the Finnish official added. “We are on the same side as Belgium. We will find solutions together to ensure that all risks are checked as much as possible.”

Belgium is not the only skeptical country, however, and a majority is not guaranteed.

Italian Prime Minister Giorgio Meloni told Italian lawmakers she would support the deal “if the legal basis is solid.”

“If the legal basis for this initiative is not strong, we will give Russia its first real victory since the beginning of this conflict.”

Malta, Bulgaria and the Czech Republic are also said to be unconvinced by the controversial proposals.

If the deal goes through and Russian assets are returned to Ukraine, the worst-case scenario for Belgium would be a court order ordering it to return the funds to Russia.

Some countries have said they will be prepared to provide billions of euros in financial guarantees, but Belgium wants to see those numbers increase.

In any case, European Commission officials believe that the only way for Russia to recover the loan is to pay reparations to Ukraine – at which time Ukraine will return its “reparations loan” to the EU.