Belgium blocks Ukraine “reparation loan” decision. Europe is looking for a plan B — and here’s what it could be (in lay terms)

What are frozen Russian assets and what is the meaning of the "reparations loan"?

A few days after the full-scale invasion began, the European Union, the G7 countries, and Australia imposed sanctions that froze almost €260 billion in Russian assets. These assets consist of bonds, developed-country currencies, and gold — states hold their reserves in safe securities, not cash. They are their “safety cushion” in case of crises.

The largest part (approximately €210 billion) of such Russian assets is held in the Belgian company “Euroclear”, which controls and stores securities and financial assets across Europe. The EU cannot simply take and take assets in Russia, even if they are subject to sanctions. Without a ruling from the International Court of Justice, such a seizure would be illegal.

But even frozen assets earn interest, like a bank deposit, and the profits can be used without violating international law. That is what the G7 countries did last year. They created the Emergency Refinancing Arrangement (ERA) and pledged to provide Ukraine with a loan totaling almost €45 billion.

The interest on them is paid from the income that the securities and other assets in which Russian savings are invested continue to generate. Ukraine has already received most of the funds under the ERA.

On September 10, European Commission President Ursula von der Leyen proposed going even further. She wants to use not only profits, but also the frozen money itself as collateral. Radio Liberty learned about the details and conditions of such a mechanism from an official EU document.

The amount of cash accumulated thanks to the Russian Central Bank’s bonds in Belgium’s “Euroclear” is currently around €176 billion. Part of this money will have to be used to repay the ERA loan from the G7 countries (we wrote about it above). And then there will be around €140 billion of net financing left for Ukraine.

The idea behind the loan for Ukraine is to transfer these funds to the European Union, which will “enter into an individual debt contract with “Euroclear” at 0% per annum”. The EU will use them to finance the loan to Ukraine. And it will only pay it back if it receives Russian reparations after the war is over.

Why does Ukraine need such a “reparation loan”?

Because Ukraine is short of money, and grants and short-term loans from partners no longer cover all costs. Just a few months ago, the government estimated that there was a total shortfall of $37.4 billion in international funding over the next two years. But as the war continued, this amount has increased dramatically.

Ukraine now lacks at least $60 billion from abroad. The European Commissionʼs "reparation loan" mechanism could fill this need. However, if these funds are not found, Kyiv could face a financial crisis as early as March next year.

Why such a complicated scheme? Canʼt the European Union simply allocate its own funds to help Ukraine?

In short, no. Europe cannot simply take money from its budget due to legal restrictions and political conflicts. The EU budget is a multiannual financial framework, where everything is written for seven years, and many programs have already been effectively “eaten up” by the crises of recent years (COVID, energy, etc.).

This is confirmed by the 2024 report of the European Court of Auditors, which states that the EU’s debt burden is growing.

To suddenly extract large sums from the budget, it is necessary to either redistribute already approved items (i.e., give money from programs for farmers, science, and regions), or increase contributions from EU countries.

Thousands of people took to the streets of France against budget reforms, September 18, 2025, Paris.

National strikes in Brussels. Workers in both the public and private sectors protest against the federal governmentʼs planned cuts to social spending, October 14, 2025.

This is politically difficult: governments are reluctant to take on new spending when their constituents are already feeling the pressure of inflation and energy prices.

But even if European leaders agree to allocate the money, it would not legally be used for military spending – it would violate financial regulations and the rights of national parliaments to approve their countries’ contributions.

Then why doesnʼt Europe simply confiscate frozen Russian assets?

In general, this is possible. The European Union has already legally developed scenarios that, in theory, allow the use or confiscation of some of the frozen assets of the Russian Federation, as discussed in detail in a study by the European Parliament. The document analyzes several legal scenarios and indicates what procedures and risks each of them entails.

The problem is that this is primarily a political decision. European leaders fear unpredictable consequences for their economies and the international financial system. Europe positions itself as a safe place to store money. Almost all countries in the world invest their reserves there, because they are confident that the EU is a legal space where no one will take assets without a court and legal grounds.

If Europe goes for direct confiscation, even for a “noble” purpose, investors will begin to overestimate the risks. Central banks of other countries may reduce their reserves in euros. State funds will begin to transfer assets to the yuan, dollar or Swiss franc in order not to take risks. This will reduce the role of the euro as an international reserve currency, which will directly hit the economic interests of the EU itself.

Asset confiscation affects fundamental international legal guarantees. Under international law, state assets are immune from seizure and confiscation. This is part of the so-called “sovereign immunity” principle, which protects states from interference in their property by other states.

If the EU confiscates Russian assets, it effectively violates this principle. This means that any other country (say, China or Saudi Arabia) can say:

“If Europe can simply take Russia’s reserves, who guarantees that tomorrow it won’t take ours?”

In addition, Russia or even private banks and funds that had a stake in these frozen assets can file claims in international arbitrations or EU courts.

But a legal report by the Kyiv School of Economics says that the controversy over Russia’s “sovereign immunity” is somewhat exaggerated. In fact, the principle only applies to legal proceedings and does not mean that Russia is automatically protected from any action against its assets.

First of all, the main risk in this story is for Belgium, where most of the assets in “Euroclear” are stored. After all, it may be held liable in this case. And even if Russia does not win, the court process itself will last for years — this creates legal uncertainty and reputational losses.

If freezing Russian assets is the most beneficial option for Europe, why hasnʼt this decision been made yet? Is Hungary against it again?

But no, this time itʼs Belgium. It wants the risks to be shared by all EU countries because itʼs afraid of being left alone with Russian lawsuits and a potential hole in “Euroclear” capital.

If the European Commissionʼs plan fails, Russia could file lawsuits or even respond symmetrically, by confiscating Western assets. Moscow was preparing for such an option. Back in 2022, Russia partially froze foreign assets on its territory to curb capital outflow. Foreigners from "unfriendly" countries cannot sell their assets.

On the eve of the European Council summit on October 23, Belgian Prime Minister Bart de Wever put forward three conditions and said that he would block the decision on the “reparation loan” until he received guarantees from all EU countries.

Despite this, most European leaders, including Volodymyr Zelensky, were convinced that the decision on the loan would be made at this summit. But this did not happen.

One European diplomat told Politico:

“No one wants to look guilty about Ukraine being left without money, but in reality, nothing has been agreed yet.”

The reason is probably that Bart de Wever and his team believed that the European Commission had ignored their concerns and even offended Brussels by sending the reparation loan plan to the capitals without first agreeing it with the Belgian authorities.

And the Belgian prime minister could also be acting for domestic political reasons. His coalition is hanging by a thread due to financial disputes. The Belgian government has been unable to agree on the countryʼs budget for weeks, and Bart de Wever is threatening to resign if there is no agreement by November 6.

But Hungary was also involved here. According to the results of the summit, 26 out of 27 countries (traditionally excluding Budapest) confirmed the EUʼs readiness to financially support Ukraine for the next two years. They approved the relevant document. However, the clause on the use of frozen Russian assets for the benefit of Ukraine was removed from the final text.

So what now, whatʼs plan B?

In short, the European Commission was given "homework" — to continue consultations with the capitals, especially Brussels, to try to reach an agreement by the next European Council summit on December 18. So far, there are three scenarios.

The first is the same "reparation loan" from frozen assets, if the European Commission convinces Belgium to lift its veto.

The second option suggests that EU countries could raise tens of billions of euros through joint debt in the form of Eurobonds for Ukraine. This is a less advantageous and more complex scheme that imposes obligations on all countries, including Belgium.

The Netherlands and Germany do not want to take on additional debt, and France and Italy already have large loans, so joint borrowing is an unpopular decision for them.

In essence, the second option serves as a diplomatic tool, a kind of “horror story for Belgium”: if the country does not agree to Plan A now (using frozen Russian assets), it will receive Plan B — more complicated, expensive and less advantageous, and at the same time it will also have to take on some of the risk.

And the third scenario is to “leave Ukraine to its fate”. But according to European diplomats, only Hungary would support this.

Therefore, now European leaders, together with the European Commission, will try to win Belgium over to their side as soon as possible. Not least because Hungary is already considering creating a coalition in the EU with the Czech Republic and Slovakia to oppose further support for Ukraine.