The European Union’s flagship proposal to finance Ukraine through a reparations loan, backed by frozen Russian assets, is now under severe strain. EU foreign policy chief Kaja Kallas acknowledged the initiative faces “different pressures from different sides” as a growing list of member states voices skepticism.
Kallas defended the strategy on Monday, calling the reparations loan the “most credible option” available. However, she admitted the path is becoming “increasingly difficult.”
Her remarks come just days before a critical summit on Thursday. There, EU leaders must determine how to meet Kyiv’s financial and military requirements for the next two years, a commitment expected to total at least €90 billion.
The opposition has widened significantly. Italy, Bulgaria, Malta, and the Czech Republic have joined the ranks of critics, reinforcing Belgium’s long-held resistance to the plan.
Under the current scheme, the European Commission would utilize interest-free credit lines, channeling immobilized Russian Central Bank assets toward Ukraine. Kyiv would only be responsible for repayment if and when Moscow agrees to compensate for the war’s damages—a highly improbable scenario.
The vast majority of these assets, an estimated €185 billion, are held in Brussels by Euroclear, a central securities depository. An additional €25 billion is scattered across private banks in five other EU countries.
Belgium has been the most vocal opponent from the start, citing fears of Russian retaliation and facing multi-billion-euro losses in court. These fears were reinforced last week when the Russian Central Bank filed a lawsuit against Euroclear.
To address these concerns, the Commission has offered guarantees and safeguards, even indefinitely immobilizing the assets to prevent a liquidity crisis.
In an unexpected move on Friday, Italy, Bulgaria, and Malta issued a joint declaration. They urged the Commission to explore “alternative solutions” that would offer “predictable parameters” and “significantly less risks” than the current loan mechanism.
They suggested these alternatives could act as a “bridge” to maintain Kyiv’s funding while leaders gain time to thoroughly debate the two primary options: the Russian-asset loan or joint EU-level borrowing.
Separately, Czech Prime Minister Andrej Babiš echoed these worries after meeting with his Belgian counterpart. Babiš firmly stated his country would “not financially contribute to the aid,” ruling out both guarantees and contributions from the Czech budget.
Kallas conceded that the discussions are challenging. She stressed that joint EU debt is a non-starter, as it requires the unanimity that Hungary has already indicated it would withhold.
She argued the loan strategy avoids taxpayer money and sends “a clear signal” that Russia must ultimately pay for the damage inflicted.
Even though the reparations loan technically requires only a qualified majority for approval, Kallas emphasized the importance of bringing Belgium on board, as it is the primary custodian of the assets.
“If we keep united, we are much stronger,” she concluded, dismissing fears of retaliation as “just threats that Russia is posing.” Would you like to know more about the role of the US in the latest Ukraine funding talks?
