From pocket to pocket. The EC wants Ukraine to use Russian assets to purchase European weapons

The European Commission proposes that the loan of EUR 140 billion, which Ukraine is to receive thanks to the use of frozen Russian assets, should be used mainly for the purchase of weapons from European producers – according to a document obtained by PAP.

According to the proposal, the EU would obtain funds for a loan from the financial institution Euroclear, where most Russian assets are frozen, and the debt would be secured by member states. The funds obtained would go to Ukraine in the form of an EU loan, which Kiev would repay only after the end of the Russian invasion and obtaining reparations from Russia.

The EC document shows that some member states postulate that the funds from the reparations loan should first be allocated to the purchase of armaments and the development of the European defense industry. Other countries are demanding more flexibility in the use of funds. The EC proposes a compromise model of “two pillars”: the first one – the larger one – would support the development of the Ukrainian defense industry and its integration with the European arms sector, while the second one would include budget aid for Ukraine.

The EC estimates that the loan could provide Ukraine with approximately EUR 45 billion annually in 2026–2028. Together with the existing support, which amounted to EUR 178 billion, this would be – as emphasized – the largest financial commitment in aid to Ukraine in the world.

The document emphasizes that the project is consistent with the principles of international law. In the proposal, the assets of the Central Bank of Russia remain formally intact – they are not confiscated, but only the funds resulting from their freezing are used.

The EC also indicates that this measure is proportional to the “unprecedented aggression against Ukraine and a flagrant violation of the United Nations Charter.” The mechanism is to be temporary and reversible – after the war ends and Russia pays compensation, Russian assets would be unblocked.

The initiative assumes that the reparations loan will be covered by guarantees from member states to protect the EU against financial risks in the event of unlocking Russian assets without prior reparations to Ukraine. The EC proposes the creation of a common guarantee mechanism that would allow for sharing any possible risk among all EU countries.

Potential risks were also indicated, including: that Belgium – as Euroclear's country of residence – could be sued for damages. However, the EC assesses this risk as “very limited”, emphasizing that these funds are frozen by a decision of the European Union, and any judgments could not be enforced within the EU.

According to the EC, in the proposed model the loan would be the debt of the European Union, not individual member states. Countries providing guarantees would not increase their public debt, and their liabilities would be classified as potential rather than actual budget expenditure – unless the guarantees were triggered.

At the end of the note, the EC announces an analysis of the possibility of extending the loan mechanism to other Russian assets frozen in the European Union, estimated at approximately EUR 25 billion. These mainly concern deposits in commercial banks in various Member States. However, the EC stipulates that this requires a detailed legal analysis due to the diverse nature of these assets and contracts with the Central Bank of Russia.

According to the EC document, the initiative was initially discussed at the Committee of Permanent Representatives (ambassadors of member states to the EU), a group of financial advisors and at a meeting of EU finance ministers. According to the document, the concept was “generally positively received, although member states indicated the need to refine several elements.”

Russian assets worth approximately $300 billion are frozen around the world. Of this, EUR 210 billion is located in Europe, including EUR 185 billion managed by Euroclear. About €176 billion of this amount is deposited in cash and the remaining €9 billion in securities.

From Brussels Łukasz Osiński (PAP)

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