The European Union is actively considering innovative financial strategies to support Ukraine amidst its ongoing conflict with Russia. One such proposal involves leveraging frozen Russian assets to underpin a ‘reparation loan’ aimed at bolstering Ukraine’s wartime finances. This approach seeks to circumvent potential vetoes from Hungary, a member state known for its pro-Moscow stance. European Commission President Ursula von der Leyen recently introduced the concept, emphasizing that the loan would be structured around cash balances linked to Russian central bank assets frozen in the West following Moscow’s invasion of Ukraine. Crucially, the plan avoids seizing these assets, a move that has been a red line for some EU members. The proposed mechanism would involve replacing the frozen Russian assets with zero-coupon bonds issued by the European Commission, guaranteed by either all EU countries or a coalition of willing participants. This strategy aims to ensure that Ukraine would only repay the loan once it receives compensation from Russia for war-related damages. The initiative is still in its preliminary stages, with many details, including the exact amounts, yet to be finalized. However, officials believe that this approach could provide Ukraine with much-needed financial support while minimizing political risks associated with Hungary’s potential veto. The EU has already been using interest from the frozen assets to repay a $50 billion loan extended to Ukraine by G7 countries. Moving forward, the proposed scheme could offer greater investment flexibility and higher returns, further aiding Ukraine’s recovery efforts.
EU floats plan to use frozen Russian assets for Ukraine loan, bypassing a Hungary veto
