The European Union is considering a “reparations loan” for Ukraine that could reach up to 130 billion euros. This amount will be finalized after the International Monetary Fund assesses Ukraine’s financial needs for 2026 and 2027.

The loan proposal, suggested by European Commission President Ursula von der Leyen, is based on frozen Russian assets in the West following the invasion of Ukraine in 2022. The intention is to help Ukraine fund its war efforts, with repayment expected only once Ukraine receives reparations from Russia through a peace deal. The potential risk is shared by EU and possibly some G7 countries.

Most of the approximately 210 billion euros worth of Russian assets in Europe are currently held in Euroclear, with 175 billion euros now matured into cash. Before moving ahead with the new loan, the EU aims to repay the existing 45 billion euro G7 loan. The final loan details are still under discussion, and the EU is planning a mechanism to use these frozen assets without confiscating them, a concern for many European governments and the European Central Bank. The loan could involve a Special Purpose Vehicle to manage the immobilized Russian cash in exchange for bonds issued by the European Commission.

With information from Reuters