Reparations loan for Ukraine: what the EU offers and why it is risky
11 September 2025 17:53
The European Union is in favor of developing a new strategy to support Ukraine, calling for a solution to Kyiv’s military financing at the expense of Russia’s frozen assets as soon as possible. This was stated by European Commission President Ursula von der Leyen on September 10 during a speech in the European Parliament, according to Yevropeiska Pravda.
Von der Leyen emphasized that it was Russia that started this war, and it is Russia that should bear financial responsibility for it.
“That is why we must urgently develop a new mechanism for financing Ukraine’s defense, based on the proceeds of frozen Russian assets. We can use these financial resources to provide Ukraine with a reparations loan. At the same time, the assets themselves will remain untouched, and the risks will be distributed among everyone,” she explained.
According to the head of the European Commission, Ukraine will return these funds only after Russia compensates for the damage caused. However, the funding can help right now.
This money plays a key role not only today, but also in ensuring Ukraine’s security in the medium and long term. In particular, they can be used to strengthen the Ukrainian Armed Forces as the first line of defense and guarantor of security,” von der Leyen added.
She also said that the European Commission plans to propose a new initiative aimed at supporting investments in the development of Ukraine’s defense potential.
According to Reuters, Ursula von der Leyen did not specify the exact amount or details of the structure of the proposed reparations loan.
Meanwhile, on September 10, Ukraine received the eighth tranche of 1 billion euros under the G7 Extraordinary Revenue Acceleration for Ukraine (ERA) initiative, as reported by the Ministry of Finance of Ukraine.
In total, Ukraine has already received EUR 10 billion from the European Union under the ERA program, and the remaining funds are planned to be disbursed gradually by the end of 2025.
The ERA program provides for the allocation of $50 billion to Ukraine, which is guaranteed by future profits from frozen Russian assets. The European Union’s contribution to this amount is 18.1 billion euros ($20 billion), the statement said.
The Ministry of Finance also emphasized that since the beginning of the full-scale invasion in February 2022, the European Union has remained the largest donor of direct budget support for Ukraine, with a total of 58.5 billion euros provided for key state budget needs. In just eight months of 2025, Ukraine has already received more than €16.5 billion from the EU.
There is already a precedent for using income from Russian assets
Oleh Pendzin, a member of the Economic Discussion Club, in an exclusive commentary for "Komersant Ukrainian", spoke about the mechanism of financing Ukraine with the proceeds of frozen Russian assets and assessed the prospects for receiving full reparations.
According to the expert, the mechanism of using Russia’s frozen assets has already been partially implemented within the framework of the G7’s Extraordinary Revenue Acceleration for Ukraine (ERA) initiative, which provides for a $50 billion loan to Ukraine to be repaid from the profits generated by these assets.
We already have a precedent of using frozen Russian assets, or at least the income from them. For 2025, Ukraine received a $50 billion loan, which will be repaid over 10 years from the proceeds of Russia’s frozen assets,” Pendzin explains.
According to him, the annual income from these assets is about €3.5 billion. Thus, within a decade, these revenues should fully cover the loan amount.
European Commission President Ursula von der Leyen has recently proposed to provide Ukraine with a reparations loan, i.e., funding that would be repaid using possible future reparations from Russia.
Ursula von der Leyen has proposed to provide Ukraine with a reparations loan. “That is, the money is given today, and it will be repaid through reparations that Russia may agree to pay after the conclusion of a peace agreement,” the economist said.
“This approach allows us to provide Ukraine with the necessary assistance right now, without confiscating the assets themselves, but only using the profits from them. At the same time, it carries political and legal risks.
Europe and America agreed to this in order to provide Ukraine with funds without touching the assets themselves. But those countries that issue a reparations loan actually run the risk that if Russia does not agree to reparations, there may be nothing to return the money from,” Pendzin adds.
Why it is difficult to confiscate Russian assets
Pendzin emphasizes that the complete confiscation of Russian assets in favor of Ukraine is currently legally and politically unlikely. He identifies three possible ways of doing so, all of which seem unrealistic at the moment:
- A decision by the UN Security Council – blocked by the veto of Russia and China.
- A decision by an international court – the procedure may take 15 years or more.
- Russia’s consent to reparations in a peace agreement – unlikely in the current environment.
The first option – the UN Security Council – is impossible. The second option is the courts, which will take years. And the third option, Russia’s agreement to reparations, looks unrealistic at the moment. But Ukraine needs the money now,” the expert emphasizes.
Where to get the money: assets or taxes of Europeans?
Given the difficulties in making decisions on the use of budget funds, EU countries are looking for alternatives. And the frozen Russian assets are currently almost the only realistic option.
There are two sources of money: the first is taxes from EU citizens. But everything there is controlled by the opposition, the accounting chambers, and parliaments. It is very difficult. The second is the income from the frozen assets of the Russian Federation. They have been scheduled for 10 years, and part of them has already been used to cover the program until 2025,” explains Pendzin.
“The year 2026 is of particular concern. Pendzin warns that there is currently no clear understanding of where Ukraine will get the necessary funding for military and budgetary needs.
For 2026, at least $25 billion is needed for the army and another $40-45 billion for macro-financial support. And it is not yet clear where to get this money from,” he notes.
Summarizing, the economist admits that the reparations loan is not an ideal tool, but in the current circumstances it is one of the few possible ones.
“A reparations loan is essentially an attempt to find money somehow. And no one knows what will happen next,” Pendzin summarizes.
“So, in the current situation, when traditional legal ways to confiscate Russian assets are blocked or take too long, the European Union is forced to look for compromise solutions. A reparations loan is not perfect, but it is currently practically the only alternative to direct seizure of frozen assets. It allows us to support Ukraine today without violating the complex legal framework. However, the key question remains: who will bear the risks if Russia does not recognize its obligations? There is no answer to this question yet, nor are there clear guarantees for creditor countries. But one thing is clear: without new financing mechanisms, Ukraine will not be able to get through 2026 in a stable manner.
Читайте нас у Telegram: головні новини коротко
