EU to borrow for Ukraine, scrap plan to use Russian frozen assets

BRUSSELS,— European Union leaders agreed Friday to raise funds through joint borrowing to support Ukraine’s military and government operations for the next two years, moving away from an earlier proposal to rely directly on frozen Russian state assets, officials said after a late night summit in Brussels.

The decision followed extended discussions among EU heads of state and government over how to guarantee continued financial assistance to Kyiv amid concerns that Ukraine could face severe budget shortfalls by mid next year without additional help from Europe.

Antonio Costa, who chaired the EU summit, told reporters early Friday that leaders approved a package totaling 90 billion euros for Ukraine. He said the money would be provided through a loan backed by the European Union budget and issued as a matter of urgency.

According to Costa, the funding arrangement allows the bloc to act quickly while avoiding legal and political obstacles tied to using frozen Russian sovereign assets directly.

EU leaders also authorized the European Commission to continue examining a separate financing mechanism based on Russian assets immobilized within the European Union.

However, that approach was not adopted at this stage due to unresolved legal and financial concerns, particularly objections raised by Belgium, where most of the assets are held.

Officials said around 210 billion euros in Russian state assets remain frozen across the EU, with approximately 185 billion euros located in Belgium. Belgian authorities sought guarantees to protect the country from potential legal claims or retaliatory measures if the funds were used to support Ukraine.

Belgian Prime Minister Bart De Wever said questions surrounding the so called reparations loan made it impractical for now. Speaking to journalists, he said the bloc chose an alternative path that preserved unity and avoided internal disputes.

Despite initial resistance, the borrowing plan gained approval after Hungary, Slovakia, and the Czech Republic agreed not to block the move, provided they were not required to bear financial responsibility for the loan.

Hungarian Prime Minister Viktor Orban, who has opposed measures involving Russian assets, was able to claim the outcome as consistent with his position, EU diplomats said.

An EU diplomat told Reuters that the final arrangement allowed action to move forward without direct participation from Hungary, Slovakia, or the Czech Republic.

German Chancellor Friedrich Merz said the decision sent a clear message. He stated that the agreement benefits Ukraine while maintaining pressure on Russia, which remains obligated to pay war reparations before any frozen assets could be released.

EU leaders reaffirmed that Russian assets would stay frozen until Moscow compensates Ukraine for war damage. If such payments occur in the future, Ukraine could use those funds to repay the EU backed loan, officials said.

The funding decision comes amid growing concern within the bloc that Ukraine could face financial collapse in the second quarter of next year without sustained external support.

EU officials warned that such an outcome could shift the balance of the conflict and increase security risks for Europe.

Several leaders said the complexity of using Russian assets directly made the borrowing option the most practical solution at this time. EU foreign policy chief Kaja Kallas said the bloc needed to act decisively to avoid failure.

Ukrainian President Volodymyr Zelensky attended the summit and urged leaders to eventually approve full use of Russian assets. He said those funds would enable Ukraine to continue defending itself against Russian military operations.

The European Commission is expected to continue work on alternative funding structures while implementing the newly approved loan mechanism.

(With files from Reuters)