How Western partners one by one buried Ukraineʼs hopes for a reparations loan — behind the scenes of the negotiations, which were not without surprises and threats from the Russians. Negotiator Mykola Yurlov tells the story

Since 2022, we have been constantly talking about Russia having to pay reparations to Ukraine. Part of their source could be Russian assets frozen by the West. But at some point, they started talking less about confiscation, and instead a new term appeared — “reparations loan”. Why did this happen?

The first talk about such a loan was back in 2022, but the idea was not given any momentum. In 2023-2024, the full transfer of assets based on the American REPO Act was discussed more. The States adopted this law in the spring of 2024, it allowed the American president to transfer the assets of the Central Bank of the Russian Federation frozen in the United States to the Special Compensation Fund.

We expected the States to implement this idea. Unfortunately, the Joe Biden administration did not dare — as they explained to us later, they were not ready to move independently, without the G7. And at the G7 level, they said that the assets would remain stationary until Russia pays for the damage caused.

In 2024, we understood that France and Germany were categorically against confiscation. That year, during the Ukraine Recovery Conference in Germany, we were forbidden to talk about this topic at all, because the administration of then-Prime Minister Olaf Scholz was categorically against it.

Just in the middle of last year, when I tried to talk about it with a high-level German diplomat, he started shouting at me, accusing me of being ungrateful, and saying that this topic was taboo.

When [Federal Chancellor] Friedrich Merz came to power, he publicly spoke out against asset confiscation. But the progress that has been made in the German administrationʼs policy on this issue now is impressive.

We will discuss the German position separately. However, when did they move from the topic of confiscation of Russian assets to a reparations loan?

The first to return to this topic in 2025 was the President of the European Commission, Ursula von der Leyen. She was supported by Chancellor Merz, Prime Minister of the United Kingdom Keir Starmer and President of France Emmanuel Macron.

Our civil society also played a very important role, which was joined by foreign colleagues — they held various events at discussion forums. Together we were able to change the attitude towards the topic of Russian assets — from not even wanting to talk about them to "letʼs consider it, itʼs possible".

Merzʼs column for the Financial Times was very important, where he publicly outlined the political necessity of a reparations loan.

In an interview with Babel, Iryna Mudra already explained what a reparation loan is, but this is a rather complicated topic — explain it again for those who missed our conversation.

Russian assets are essentially cash lying in Euroclear accounts. It is about at least €185 billion. Russia can take this money at any moment, but while it is in the bank, it has the right to dispose of it, that is, to lend it to others as loans at interest — this is what the entire banking process is built on.

The proposal from the European Commission was that the Russian Federation retains the right to demand money from Euroclear. But since the assets themselves are frozen, it is impossible to exercise this right. That is, under the reparations loan, the Russian Federation retains the right to demand, and the assets themselves should be transferred to Ukraine in the form of a loan.

But since this is not confiscation, but in fact a loan, the EU should have put its bonds there. They would be a guarantee that Ukraine will return the money when Russia pays it reparations.

Why do we call the loan reparations?

Because Russia owes Ukraine a lot of money — the president announced a figure of $800 billion. But this is a general idea based on estimates from the World Bank and other studies. The Compensation Commission will make the exact calculation.

According to RDNA4 estimates, in just three years of full-scale aggression, Ukraineʼs losses reached $589 billion. And if you count from 2014, this will be a much larger amount than the frozen assets of Russians in Europe.

A year or two ago, they launched a mechanism by which interest from the "work" of Russian funds in the bank is transferred to Ukraine. This scheme worked. Why do we need to invent anything else?

Indeed, since 2025 there has been an ERA loans scheme. This is actually a loan that was issued to us and which is repaid at the expense of excess profits from Russian assets. But in fact, the excess profits are quite small, somewhere around 1% per annum.

In April 2025, we suggested to the Belgians to put these funds at a higher interest rate, for example, according to the model of the Norwegian sovereign fund — it would be 7% per annum.

But even so, under this scheme we received a loan of $50 billion, we were able to cover a fairly significant part of our needs for 2025. This loan will be repaid over 30 years at the expense of the profits generated by Russian money.

But it turns out that if we get Russian assets, this loan will have to be repaid early, because there will be nothing to accrue interest on.

In this case, the European Commission proposed to reserve part of the Russian funds specifically for the repayment of ERA loans.

You said that the idea of a loan was initially supported by Britain, France, and Germany. And Belgium was against it, why?

Belgium demanded very high guarantees for itself. They believed that the Russian Federation could file a lawsuit against them in international investment arbitration under the investment protection agreement between Belgium, Luxembourg and the USSR. This agreement is still in force.

We have long convinced the Belgians that these fears are in vain. First, this agreement itself is about protecting private, not state, assets. For example, under a similar agreement between Ukraine and Russia we won about ten lawsuits against the Russian Federation over Crimea, where private companies sued. But even if the Central Bank of the Russian Federation did file a lawsuit, the probability of victory would be very low.

In fact, Russia received the right to sue when countries only froze its assets due to aggression — because they violated its right to dispose of assets. That is, what Belgium fears in the future has long since happened, and purely theoretically nothing prevented the Central Bank from filing such a lawsuit against Belgium immediately.

Instead, what did Russia do?

It successfully used its key asset — fear. There were reports in the media that the Russians threatened the Belgian leadership and that there was even an attempt on the head of Euroclear. Russia was clearly aware: if we get the full amount of assets, this will be a fundamentally important factor in our struggle.

Did the Belgians themselves confirm the information about the threats to you in private conversations?

They refused to comment on it. But even the Belgian Prime Minister admitted that he had received some threats.

If Belgium, which holds over half of all frozen assets, had asked for guarantees, what prevented it from providing them?

In fact, the European Union countries were ready to provide them with quite serious guarantees. Including those that covered minor, in our opinion, legal risks. By the way, we are not the only ones who think that these risks are minor. We also talked about this in the G7 format. Our group of lawyers and experts prepared a very detailed analysis on this issue.

Then we sent this analysis to the legal advisors of all countries. But on the day and night of the EU summit on December 18-19, we realized that we could not convince the Belgians. Belgium was categorically against it. Italy was skeptical.

According to our information, during the summit on December 18, France, which had previously supported the idea of a reparations loan, suddenly found itself on the side of Belgium and Italy, thereby blocking the initiative. In addition, we know that France refused to include in the reparations loan the approximately €20 billion of Russian assets under its jurisdiction. Can you confirm or deny this?

I canʼt comment on that.

Did you talk to the Germans?

We talked a lot with the Germans, but not after the summit.

You say that British Prime Minister Keir Starmer supported the idea of a reparations loan. After everything that happened at the EU summit, will the British give us a reparations loan?

The British were ready to provide us with a reparations loan for the Russian assets they have. But they wanted to do it after the EU.

So they wanted to see how it would go in Europe?

They were preparing to do it at the same time. Now we donʼt know what their position is. There was a long Christmas vacation abroad, and all work was paused.

In December 2025, sanctions against Russia, including the freezing of assets, were extended until July 2026. There is always a risk that at some point the decision will be different...

That is why the main result of our work over the past year is that all Russian assets are now frozen indefinitely. This decision was made after the one you are talking about. In essence, the European Commission was able to bypass the Hungarian veto. The assets are frozen until Russia agrees to compensate Ukraine for the losses.

What was the US position on the reparations loan? Some media outlets wrote that the States was also against it, and argued this with [Steve] Witkoffʼs position. How is that really?

When I was in Washington last November, we spoke with both the State Department and the Treasury. They assured us that there was no signal from their side against the reparations loan.

Moreover, on December 9, the G7 finance ministers explicitly called for the use of Russian assets.

Did the situation at the front influence the discussion of the reparations loan? Were Western partners afraid that Russia was advancing?

Of course. If from the very beginning it was said that the frozen assets should only be used to compensate for the damage, then somewhere around 2024 it became clear that sooner or later the assets should become the basis for financing our defense. Most European states understood that their security depends on our security.

Youʼre not just limited to Europe and the US, are you? Russian money isnʼt just there.

One of the very important areas remains Japan, where up to $30 billion of Russian assets are held. When we tried to talk directly to the Japanese, they said that they cannot do it so easily, because the money is stored directly in the Bank of Japan.

As a lawyer, I clearly understand that when there is a political will, legal solutions can be found. And when there is no political will, a billion legal arguments appear, why not.

As a result, instead of a reparation loan, we received macro-financial assistance, although this is also a loan. What is the interest rate on this loan, and when do we have to repay it?

I canʼt comment — this is the competence of the Ministry of Finance. The Ministry of Finance, together with the EU, will detail this. But if we hadnʼt pressed for a reparations loan, this assistance would have been more difficult to obtain.

Whatʼs the plan next? Will you continue negotiations on a reparations loan or will you look for some new instrument?

There are two options.

First, it is important to understand that the reparations loan remains on the agenda — the EU has not completely rejected the idea. That is, you can move along this path or create a Compensation Fund within the framework of an international compensation mechanism and transfer frozen Russian assets to this fund.

The final act of the diplomatic conference held in The Hague on December 8 last year, signed by 44 states plus the EU, calls for finding ways to force Russia to pay. And one of the ways is to fill the Compensation Fund at the expense of frozen assets.

But how exactly this will happen, we are not ready to say now, much depends on the broader context.

How do you plan to convince Belgium, Italy, and perhaps France to stop blocking this issue?

Letʼs not include France in this list for now. In short, now we need to analyze the situation and how the situation within European countries has changed. We will have to start something almost from scratch, but we have a good team led by the deputy head of the Presidentʼs Office Iryna Mudra.

From the very beginning, we have attracted specialists and experts. On the Ukrainian side, these are, for example, Olena Halushka from the International Center for Ukrainian Victory, Andriy Mikheyev, Anna Vlasyuk from the Kyiv School of Economics.

There are international experts: Yulia Zyskina from "Together for Ukraine", an American of Ukrainian origin, in Germany we are very helped by lawyer Patrick Heinemann. On our side, I also attracted Pavlo Shapoval, an experienced expert on political issues and strategies. Taras Semenyuk, whom we attracted as a communications officer, is very helpful to us.

If we are talking about the Compensation Commission and the Compensation Fund, it will take several more years. For the Compensation Commission to work, this decision must be ratified by 25 parliaments of the countries that signed the Convention on its establishment. And the states must also allocate money for it, form the Fund. So itʼs a long story.

Letʼs forget the word "confiscation", we donʼt use it. The Commission can actually be created this year. I donʼt see any obstacles to 25 countries ratifying the Convention. As of now, 36 countries have already signed it. And the Register of Losses was created by 44 states plus the European Union, the potential is there.

Time has passed since the registry was created. For example, the government in the Czech Republic has changed, the speaker of their parliament is making anti-Ukrainian statements...

Of course, we cannot predict everything, and it is difficult to say what kind of parliaments will be in some countries after the elections. But what we are already seeing now is that there is every reason to expect that we will gain 25 ratifications this year.

It is clear now, when is the first ratification, who will ratify first?

I hope it will be us. We are currently preparing a package of documents. According to the convention, the first five states that ratify it become members of the governing body of the Compensation Commission. This is a direct incentive for the earliest possible ratification.