To help finance the war in Ukraine and cover the government’s debt for 2026-27, the European Commission is planning to raise €90bn (£76bn) through new bonds. The document proposes two different ways of funding the venture:
Commission Unveils Two Financing Options
- A loan endorsed by the EU, to be floated on private markets;
- A “reparations loan” utilizing the money from the frozen Russian state assets scattered all over the EU.
Ursula von der Leyen, President of the Commission, said that the project “will give” Ukraine the tools “to fight” and also the opportunity to “negotiate from a position of power”. The aim of the program is to cover about two-thirds of the financial needs of Ukraine, with other international partners pledging to cover the rest.
Belgium Remains a Key Obstacle
According to the Commission, even after addressing the concerns of the EU member states, Belgium which is the location of Euroclear, the custodian of a major part of the frozen Russian assets, is still not persuaded remains. Brussels holds about €140bn (£122bn) of Russian assets and has been expressing her concerns over the risk of exposure to the law and that such a move may influence the direction of future peace negotiations.
Maxime Prevot, the Belgian Foreign Minister once again repeated that the legal texts of which he is talking “have not been addressed in a satisfactory way”. Belgium wants that before any steps are taken, EU countries should be sure that they are collectively capable of covering any costs that may arise from a legal case against Russia. Prevot not only termed the reparations loan as “the worst option” because it was both risky and unprecedented but also, he urged the EU to consider the alternative of borrowing from the financial markets.
Legal and Political Risks
By the use of the reparations-loan model, the proposal sidesteps the issue of confiscation because the money would, theoretically, be taken as a loan against the assets rather than forcibly taken. In case of war, only if Russia pays reparations for the DMG, will Ukraine have to repay the loan. Nevertheless, Moscow has described the plan as taking “theft” and VTB Bank director Andrei Kostin was quoted as saying that legal proceedings would take place for decades if the EU decided to go ahead.
The plan needs a qualified majority of the EU member states to be passed, meaning that 15 out of 27 members have to vote in favor which is less than the number required for the alternative borrowing option that requires unanimity. This puts the threshold for potential adoption at a lower level. Hungary, on the other hand, has been consistently against the funding of Ukraine by the EU and therefore, is voted against the alternative borrowing option that necessitates unanimity.
US Reaction and Wider Geopolitical Context
Von der Leyen said that the news of the reparations-loan idea was received warmly by the US Treasury Secretary Scott Bessent. However, there are still some questions about whether the EU proposal aligns with the 28-point plan put forward by the Trump administration to end the war, which among others, suggests joint US-Russian investment activities with frozen assets.
EU Moves to End Russian Gas Dependency
On Wednesday, the EU took a “historic step” in its plan to wean itself off Russian gas by the end of 2027. Countries in the union will stop buying liquefied natural gas (LNG) from each other at the end of 2026 and will cease pipeline gas purchases in November 2027, according to the agreement.
Von der Leyen has described the accord as signifying “the epoch of Europe entirely getting energy independent from Russia”. However, Hungary and Slovakia, the two countries which rely heavily on Russia for their energy needs, are likely to challenge the measure in court and predict heavy economic consequences if the plan goes through.
