EU Agrees €90 Billion Lifeline for Ukraine as Fight Over Russian Assets Drags On

European Union leaders have approved a massive €90 billion loan package to prop up Ukraine’s war-battered economy through 2026 and 2027, but failed to reach agreement on a far more contentious plan to tap frozen Russian sovereign assets to fund Kyiv’s defence and reconstruction.

Image Illustration. Photo by Marek Studzinski on Unsplash

The deal, sealed after late-night talks at a summit in Brussels, will see the bloc collectively borrow on capital markets and extend the money to Ukraine as an interest-free loan, backed by the EU budget. EU Council President António Costa hailed the outcome as delivering on Europe’s commitments to Kyiv, even as leaders quietly shelved – at least for now – an unprecedented bid to underwrite Ukraine’s future with Russia’s immobilised wealth.

A €90 Billion Bet on Ukraine’s Survival

Under the agreement, the EU will raise €90 billion (about $105 billion) in joint debt and lend it to Ukraine to cover basic budget needs, keep public services running and sustain the war effort over the next two years. The package mirrors the collective borrowing model first deployed during the COVID‑19 pandemic, signalling that Brussels now treats Ukraine’s survival as a systemic crisis for the continent.

The International Monetary Fund estimates that Ukraine will need around €137 billion in external financing in 2026 and 2027 to avoid insolvency as the war with Russia grinds into its fifth year. The EU loan, while substantial, will therefore cover a little over half of Kyiv’s projected external needs, leaving other donors – notably the United States and international financial institutions – under pressure to plug the gap.

How the Money Will Be Raised – and Repaid

Rather than drawing directly on Russian assets, EU governments agreed to borrow on capital markets, issuing common debt backed by the EU budget. According to a draft summit text seen by reporters, Ukraine will not pay interest on the loan, and repayment is expected to come from future war reparations paid by Russia. Until then, the principal will sit on the EU’s books as a long‑term claim on Kyiv, underwritten politically by a pledge that the aggressor, not the victim, should ultimately foot the bill.

For Brussels, the arrangement offers a delicate compromise: it keeps Russia’s frozen reserves off-limits for now, but preserves the option of using them later to repay the EU once a reparations mechanism is in place. EU officials have repeatedly said that the legal and financial architecture for such a reparations loan remains under discussion, even after this week’s setback.

Frozen Russian Assets: The Plan That Failed – For Now

At the heart of the dispute is roughly €210 billion in Russian central bank assets immobilised in the EU since Moscow’s full‑scale invasion of Ukraine in February 2022. The bulk of this money – about €185 billion – is held by Brussels-based clearing house Euroclear in Belgium, leaving the Belgian government uniquely exposed to any Russian legal or economic retaliation.

Several EU states, led by Germany and the European Commission, had championed an innovative “reparations loan” that would leverage those frozen assets: the EU would borrow against them now, on the assumption that Russia would eventually be forced to pay damages for its invasion. But Belgium insisted on “uncapped guarantees” to shield itself and Euroclear from potential lawsuits and counter‑seizures, a demand other capitals ultimately rejected as too risky and open‑ended.

The legal challenges are formidable. Seizing or using sovereign assets goes far beyond the sanctions regimes imposed after 2022 and would be largely unprecedented in modern international finance. Analysts note that even German state assets were not confiscated outright after World War II, underlining the scale of the legal and diplomatic break Brussels would be making if it moved from freezing Russian reserves to spending them.

Dissent in the EU – and Delight in Moscow

Although the loan was formally approved by all 27 member states, three governments – Hungary, Slovakia and the Czech Republic – secured an opt‑out that ensures they will not bear the financial burden of the scheme. The trio, all led by governments sceptical of further Ukraine funding, agreed not to veto the package in exchange for guarantees that they will not contribute to the debt service.

Hungarian Prime Minister Viktor Orbán, a long‑time critic of sanctions on Russia, framed the outcome as a victory for his position. He warned that channeling more money to Kyiv risked dragging Europe deeper into war and boasted that he had protected Hungarian taxpayers from any liability. In Budapest’s telling, the decision not to touch Russian reserves showed that “law and sanity” had prevailed over what Moscow has derided as Western “robbery” of its state assets.

Kyiv’s Relief – and Lingering Shortfall

For Ukraine, facing mounting battlefield costs and collapsing tax revenues, the EU deal is first and foremost a reprieve. Without fresh external financing, officials in Kyiv had warned of a risk of effective bankruptcy as early as spring 2026, with the government struggling to pay salaries, pensions and military wages. President Volodymyr Zelenskyy welcomed the package as “significant support” that “truly strengthens our resilience” and provides a financial security guarantee for the coming years.

Still, Ukrainian officials have made clear that the loan will not be enough on its own. Kyiv’s finance ministry has estimated that its total wartime recovery and reconstruction bill already exceeds €600 billion, and will rise further the longer Russia’s invasion continues. Finance Minister Serhiy Marchenko has urged European partners not to abandon the reparations‑loan idea, arguing that using Russian assets remains “a systemic, long‑term solution” to secure Ukraine’s defence and rebuild its shattered infrastructure.

What the Stalemate Means for Future Sanctions Policy

Beyond Ukraine’s immediate financing needs, the dispute over Russian assets has exposed a deeper fault line in Europe’s sanctions strategy. Since 2022, Western allies have frozen an estimated $300 billion in Russian central bank reserves worldwide, including around €210 billion in the EU alone – an unprecedented use of financial statecraft intended to constrain the Kremlin’s war machine.

Whether those reserves remain frozen indefinitely or are eventually mobilised to fund reparations will help determine how powerful – and how politically sustainable – such financial warfare tools are in future conflicts. Advocates of seizing the assets argue that forcing Russia to pay is both morally necessary and economically efficient, reducing the burden on European taxpayers. Opponents warn that breaking with long‑standing protections for sovereign reserves could undermine global trust in Western financial systems and invite retaliation against European and US assets abroad, particularly in jurisdictions aligned with Moscow or Beijing.

Conclusion: A Lifeline, Not a Final Answer

The EU’s decision to extend a €90 billion interest‑free loan to Ukraine is a powerful signal that, despite growing war fatigue and political divisions, Europe is not prepared to see Kyiv collapse for lack of cash. It buys Ukraine time, stabilises its public finances and reassures investors that the country has backing from one of the world’s largest economic blocs.

But the failure to agree on using frozen Russian assets also underscores the limits of European unity when legal risk and domestic politics collide. With Washington’s own support for Ukraine increasingly uncertain and reconstruction needs spiralling, the unresolved question of who ultimately pays for this war – Russia, Western taxpayers, or both – will continue to dominate debates in Brussels long after this latest loan is disbursed.