EU Considers Plan to Loan From Frozen Russian Assets or Borrow For Ukraine

The European Union is considering a major plan that would take a loan from Russia's frozen assets in Belgium to allow them to fund Ukraine, in addition to an alternate idea for common borrowing.

Over the last few months, Europe has worked on devising a plan that would give Ukraine a stronger position against Russia, hoping to have some sort of influence over the war after they were left out of peace talks by US President Donald Trump.

Now, the EU is considering two plans that would help fund Ukraine, but both have raised concerns and remain controversial.

The European Commission's primary plan utilizes frozen Russian assets in Belgium. Due to the war, over €210 billion ($244 billion) in Russian assets have been frozen in Belgium– and the EU's latest plan attempts to take a loan from these assets.

The majority of frozen Russian assets belong to Euroclear, a global securities company headquartered in Belgium, allowing the EU to borrow from these assets to supply cash to Ukraine. Providing Ukraine with such a massive amount of money would allow the country to continue their war against Russia for several more years, at least, putting them in the perfect place for negotiation with Russian President Vladimir Putin, whose financial backing is beginning to falter.

Meanwhile, the EU would give Euroclear zero-coupon bonds in exchange for the money– a zero-coupon bond does not accumulate interest, but maintains Russia's ownership of their assets.

However, Belgium has expressed financial concerns over the reparations-backed nature of the loan. The intended final outcome of the plan is for Ukraine to use the money to rebuild and fight back against Russia, while Russia would eventually pay reparations to Ukraine for the war. The money from these reparations would then be given to the EU, who would be able to use it to pay back Euroclear, and therefore Russia, for the EU bonds if Russian assets were unfrozen.

Basing the plan on reparations carries great risks, though. Belgium and other countries have pointed out that if Russia were to pay no reparations, Ukraine is not obligated to pay money to the EU. If this were to occur, the European Union would be forced to pay the entire sum from their budget, taking money from taxpayers and governments to repay Euroclear for the bonds.

Due to these concerns, the EU have also drafted an alternate plan that would provide Ukraine with less funding but carries less risk. The alternate plan would see the EU borrow on international markets, which would place the burden on taxpayers but would delay the repayment of the borrowing. This plan carries much less risk, as it is an established policy that many countries use, but would also provide much less funding to Ukraine than the other plan.

The European Union is set to vote on the matter later this month, where they will decide on which plan to execute– Ukraine is in desperate need of funding, and without the EU's help, Russia may ramp up their attacks and take more territory.

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Image credit to European Commission