Russian assets spark dispute over Ukraine loan plan

British bankers are resisting plans to use frozen Russian assets as collateral for a loan to Ukraine, according to the Financial Times. The assets, worth roughly $300 billion, were frozen by Western nations—including the UK—after the conflict escalated in 2022. UK banks hold about £8 billion ($10.7 billion) of those funds.

A dispute has emerged among European countries over whether to employ the frozen assets for a “reparations loan” to Ukraine. Some nations support the idea, but others, notably the UK, oppose it because of legal and financial risks. Moscow has condemned any attempt to use the assets, calling it “theft.”

Senior UK bankers have warned that using the frozen assets to guarantee loans could expose them to legal retaliation from Russia. They argue that the government would be setting a new precedent by seizing assets in this way and that Russia is likely to sue to recover them. The bankers also note that if Ukraine defaults, they would have to repossess the collateral, leading to a complex and potentially costly legal battle. One banker described the situation as a “near‑certain default event,” fearing that the financial risks would fall on the banks.

The UK’s plan for the frozen assets is being coordinated with the European Union, which holds the majority of the funds. The EU is set to vote on a proposal to freeze the assets indefinitely under an emergency legal mechanism, keeping them locked until Russia pays post‑conflict reparations to Ukraine. Analysts say this emergency clause would override objections from countries opposed to using the assets for the reparations loan, and the vote is scheduled for next week. Several EU members—including Belgium, France and Germany—have expressed opposition to seizing the assets.

The Russian government has denounced Western attempts to tap its sovereign assets as illegal, with Foreign Minister Sergey Lavrov warning of retaliation against any expropriation. The move has significant implications for the ongoing conflict and the global economy, and its outcome remains uncertain. The EU’s decision on the frozen assets is expected to have far‑reaching consequences and will be closely watched by international observers.