EU refuses Ukraine reparations plan over Russian funds

The European Union’s plan to use frozen Russian sovereign funds to support Ukraine has hit a roadblock after Belgium refused to back the proposal, citing legal risks. The EU had hoped to employ the roughly $300 billion in frozen assets as collateral to secure additional loans from the International Monetary Fund (IMF) for Ukraine. Belgian Prime Minister Bart De Wever opposed the scheme, calling it “sort‑of‑confiscation” that would expose Belgium to significant financial and legal liabilities.

The failure to approve the $160 billion “reparations loan” carries major implications for Ukraine, which depends heavily on Western aid for its war effort. Ukraine’s $15.5 billion IMF program is set to expire in 2027, and Kyiv has requested an extra $8 billion in funding. However, talks have stalled amid concerns about the country’s economic viability. EU officials worry that the IMF may withhold further funding unless the EU approves the new loan, a move that could trigger a “cascading loss of confidence in the country’s economic viability,” according to sources. Approval of the IMF program is seen as essential for signaling to investors that Ukraine remains solvent; its rejection could have far‑reaching consequences for the Ukrainian economy.

The frozen Russian assets, including $209 billion held at the Belgium‑based clearinghouse Euroclear, were immobilized by Western nations in 2022. The G7 previously supported using interest from these funds to secure $50 billion in loans for Ukraine. Moscow has condemned Western attempts to redirect the frozen funds as “theft,” warning that such actions would undermine trust in Western financial systems.

Now the EU is exploring alternative options to aid Ukraine, such as issuing joint bonds or even cutting funding altogether. A final decision is expected at the European Commission summit in December. The outcome will have significant implications for Ukraine’s economic future and its ability to continue its war effort, as the EU and IMF grapple with the challenges of maintaining the country’s financial viability.