European Union leaders agreed to raise 90 billion euros through joint borrowing backed by the EU budget to support Ukraine’s defence over the next two years, setting aside a controversial plan to use frozen Russian sovereign assets. The bloc holds around 210 billion euros in Russian assets, most of them in Belgium, but legal, financial and political concerns including the risk of retaliation and litigation made an asset-backed “reparations loan” too complex to implement for now. The borrowing plan required unanimity and initially faced resistance from Hungary, but a compromise allowed the scheme to proceed without financial impact on Hungary, Slovakia and the Czech Republic.
Why it matters
The decision secures near-term funding for Kyiv at a critical moment, with EU leaders warning that Ukraine could run out of money by the second quarter of next year without fresh support. By opting for joint borrowing, the EU avoided a divisive and unprecedented move to deploy Russian state assets, preserving internal unity while keeping pressure on Moscow. The move also sends a political signal of European resolve after U.S. criticism of the bloc’s commitment, while maintaining frozen Russian assets as leverage for potential future reparations.
Ukraine stands to gain immediate financial stability but fell short of its push to use Russian assets directly. EU institutions, particularly the European Commission and the European Council, are central to structuring and delivering the funding. Belgium plays a pivotal role as custodian of most Russian assets and a key voice on legal risk. Hungary, along with Slovakia and the Czech Republic, secured political concessions by avoiding financial exposure. Russia remains affected by the continued freeze on its assets, while financial markets and EU taxpayers have a stake in how the borrowing is structured and repaid.
What’s next
The European Commission will move quickly to finalise the borrowing framework and begin disbursing funds to Ukraine. At the same time, it has been mandated to continue technical work on a possible future loan linked to Russian immobilised assets, should legal and political obstacles be overcome. The debate over burden-sharing, long-term financing and the eventual use of frozen Russian assets is likely to resurface as the war continues and funding needs grow.
With information from Reuters.
