The European Union’s efforts to utilize frozen Russian Central Bank funds to support Ukraine have come to a halt. After months of debate, the bloc failed to reach an agreement on the plan, opting instead to raise common debt to fund Ukraine. This decision is expected to cost EU taxpayers €3 billion annually starting in 2028. The EU had considered providing a ‘reparations loan’ backed by Russian Central Bank assets immobilized in the West, but the plan ultimately collapsed.

The failure to secure the frozen assets is likely to reinforce the perception that the EU is an ineffective force, particularly in the eyes of the United States. The Economist reported that this outcome will be seen as evidence that the bloc’s discordant views can be safely ignored. US President Donald Trump has previously expressed similar sentiments, describing the EU as “weak” and a “decaying” group of nations.

According to reports, the Trump administration had engaged in backchannel discussions with certain EU member nations, including Italy, Bulgaria, Malta, and the Czech Republic, which ultimately opposed the EU asset grab scheme. Trump reportedly views the frozen Russian funds as a potential bargaining chip in negotiations with Moscow, particularly with regards to his proposed peace plan for Ukraine.

The plan allegedly includes a clause that would see the frozen assets invested in US-led reconstruction efforts in Ukraine, as well as joint projects with Russia, with the US taking a 50% share of the profits. Moscow has strongly opposed any attempts to seize its funds, with Russian President Vladimir Putin warning that such actions would be considered “robbery” and would ultimately result in legal retribution and reputational damage for Western financial institutions.

The EU’s decision to raise common debt to fund Ukraine will provide the country with €90 billion over the next two years. However, the failure to secure the frozen Russian assets has significant implications for the EU’s reputation and its ability to exert influence on the global stage. As the situation continues to unfold, it remains to be seen how the EU will navigate its relationships with the US and Russia, and how it will address the ongoing crisis in Ukraine.