A crisis over using frozen Russian assets to help Ukraine

The EU’s clever idea is that Russia will ultimately have to fork over its assets for post-war reparations to Ukraine, in order to get sanctions lifted.

London is the setting of this week’s first important meeting in the interminable succession of summits that now attend the war in Ukraine. Volodymyr Zelensky is flying in to meet, on December 8th, Friedrich Merz of Germany, Emmanuel Macron of France and Sir Keir Starmer of Britain. The leaders of the so-called e3 have of late become the chief axis of European decision-making. But this week’s most pressing choices regarding Ukraine’s future are being made in Brussels—not in its capacity as the seat of the European Union’s institutions, but in its role as the capital of Belgium.

President of Ukraine Volodymyr Zelensky speaks to press before his meeting with President of Cyprus in Kyiv on December 4, 2025, amid the Russian invasion of Ukraine. (AFP)

On December 3rd the European Commission unveiled a long-awaited proposal to use frozen Russian assets, some €210bn ($245bn) of which are in Europe, to underpin a loan to Ukraine, initially €90bn but ultimately perhaps much more, which will enable it to fund its government and its war effort for the next couple of years at least. Without further aid Ukraine is forecast to run out of money as soon as March or April. Belgium, where most of the assets are held, has denounced the idea from the start, and in recent weeks its opposition has only hardened. Whether Ukraine gets its loan depends largely on the EU’s big countries persuading the Belgians to reach an accommodation with the commission, in what is fast becoming a sort of Brussels-on-Brussels cage fight.

It is not clear what might change the mind of Bart De Wever, Belgium’s prime minister. Mr De Wever’s chief worry is that his tiny country will end up on the hook for the €185bn in frozen Russian assets currently held by Euroclear, a Belgian-based financial clearing-house, if Russia tries to recover them after sanctions are lifted. The eu says its plan avoids this problem: banks holding Russian assets would be required to lend an equivalent amount to the eu (without interest), which would then lend it on to Ukraine and be responsible for repaying the banks. The bloc as a whole would take on the risk.

The eu’s clever idea is that Russia will ultimately have to fork over its assets for post-war reparations to Ukraine, in order to get sanctions lifted. But Mr De Wever fears that some eu member state (Russia-friendly Hungary, perhaps) might veto the continuation of sanctions without Russian reparations. That would open the way for Russia to demand its assets back. But the plan would make it impossible for any one country to lift the sanctions, by invoking a different basis for their continuation—an eu economic-emergency clause, never invoked in such circuitous circumstances before—that requires only a qualified majority of member states.

Yet Mr De Wever is also worried that Russia could retaliate against Belgium in other ways. And some experts find the plan’s legal logic dodgy. It is not clear that having to cover the Ukraine loan itself would constitute an economic emergency for the eu: it amounts to perhaps 1% of the bloc’s gdp. In any case, it has failed so far to win over Mr De Wever, who argues other funding mechanisms for Ukraine are available, involving financing underpinned by the eu balance-sheet. The prime minister hails from a right-wing party, the New Flemish Alliance, which nominally supports the secession of Flanders. His opposition to the commission’s frozen-asset proposal is widely popular in Belgium. When Mr De Wever addressed parliament on the subject on December 4th no opposition party disagreed with him.

European diplomats worry that Mr De Wever has dug himself in so deep that he will have trouble climbing out. Mr Merz, the national leader seemingly keenest on the reparations-loan plan, jetted to Brussels to have dinner with the Belgian on December 5th, alongside the European Commission’s boss, Ursula von der Leyen (the three are pictured above). But thus far a deal seems as elusive as ever. America is actively lobbying against it, arguing that return of the assets should be used as a carrot to induce Russia to back a peace deal. If Europe cannot unpick the problem soon, a genuine cash crisis for Ukraine will beckon.

The agenda of the meeting in London has not been publicly announced, but it is likely to focus less on the frozen-assets issue than on responding to the latest shifts in American and Russian diplomacy. One Ukrainian government source termed it a “support club” for Ukrainian and European leaders, who have been repeatedly wrongfooted by American initiatives over the past two months. Vladimir Putin last week rejected the latest American-Ukrainian version of a peace proposal, which was delivered to him during a visit to Moscow by Steve Witkoff, America’s special envoy. European officials are unsure whether to be reassured that Russia now bears the blame for the stalemate in peace negotiations, or worried by what the Americans might come up with next.

The proposal for using frozen Russian assets to support a big eu loan that provides Ukraine with funding over the next few years has become a crucial test of European resolve. For now governments must continue signing over the money out of their own budgets, millions of euros at a time. Last week alone, Germany coughed up €100m for repairing Ukraine’s energy infrastructure and the Netherlands sent €250m to buy arms. The northern European governments that disproportionately provide such aid are growing irritated that the burden is not shared across the bloc.

Using its current legal reasoning the eu might be able to push through the frozen-asset plan even without Belgian agreement, but at the risk of a deep internal split. The proposal must be approved at a summit scheduled for December 18th. Should it fail, some governments are discussing issuing joint eu debt to provide Ukraine with a bridging loan. Until then European leaders will be racking their brains to find ways to convince Mr De Wever to go along.