Reparations loan for Ukraine: under what conditions the EU provides €90 billion and whether it will have to be repaid
19 December 15:13
ANALYSIS
The European Council has made a strategic decision to provide Ukraine with €90 billion in financial assistance for 2026-2027. These funds are essentially interest-free and conditionally irrevocable, as their repayment is possible only if Russia pays Ukraine reparations for the damage caused by the war. This was announced by the Minister of Finance of Ukraine Sergiy Marchenko, who emphasized that the funds will be used for the needs of the state budget and defense, reports
What format of assistance has been agreed by the EU
According to German Chancellor Friedrich Merz, it is an interest-free loan that Ukraine must repay only after Russia pays reparations for the damage caused.
Key parameters of the decision:
- total amount – 90 billion euros;
- financing period – 2026-2027;
- form – interest-free loan;
- source of guarantees – frozen Russian assets.
In this way, the EU is actually laying down a mechanism under which the financial burden of the war should be transferred to the aggressor state.
What is a “reparations loan” and why is it conditional?
We are talking about a financial model called a reparations loan in the EU. Its logic is that Ukraine receives the funds now, and the responsibility for their repayment is actually assigned to the aggressor state, the Russian Federation.
“These funds are inherently irrevocable and interest-free for Ukraine. Repayment can only take place after Russia compensates us for the damage caused by its aggressive war.
The funds will be used for budget and defense needs,” Marchenko said.
Key condition:
- Ukraine will return the funds only if Russia compensates for the damage it has caused.
Until then, the loan:
- has no interest;
- does not create debt pressure;
- does not require payments from the state budget of Ukraine.
In fact, it is financing for future reparations to be collected from Russia.
Marchenko noted that work on the Reparations Loan will continue, as its implementation requires additional preparation.
Why the EU chose the “fallback” option
Economist Andriy Novak in a commentary
“Today, the European Union’s decision to allocate €90 billion in aid to Ukraine is a backup option that EU leaders quickly came to after failing to fully implement the option of a so-called reparations loan from frozen, seized Russian assets worth more than $210 billion,” Novak said.
How the EU will provide funds
According to the expert, the current aid package is being implemented on the principle of joint borrowing. This means that most EU countries jointly participate in financing support for Ukraine.
“The 90 billion euros currently allocated for Ukraine will be provided under a different, second backup option – on the principle of joint borrowing. All but three EU countries, namely Hungary, the Czech Republic and Slovakia, have joined this program,” the economist explains.
The amount of each country’s contribution will depend on its financial capabilities and the amount of frozen Russian assets held in the respective jurisdiction.
“The EU countries will, according to their capabilities, as well as focusing on what seized Russian assets are in their countries, provide an interest-free alleged loan to Ukraine secured by the seized Russian assets,” Novak added.
Will Ukraine have to return the money?
The key point of this mechanism is that the funds for Ukraine are interest-free and conditionally non-refundable.
“The bottom line is that Ukraine will have to repay this interest-free loan only if Russia pays reparations to Ukraine,” emphasizes Andriy Novak.
Formally, the decision does not yet contain a direct wording that these funds are provided at the expense of seized Russian assets. However, according to the expert, in fact, it is the same reparations mechanism, only with a different legal shell.
“In fact, this is supposedly the same reparations loan, but so far without a direct indication that it is financed by the seized Russian assets,” Novak said.
Why the wording is not critical for Ukraine
The economist emphasizes that the key for Ukraine is not the legal wording of the decision, but the fact of receiving the funds.
“In principle, it doesn’t really matter to Ukraine how Ukraine receives the funds, with what wording. The main thing is that it receives them,” he says.
We are talking about more than $50 billion a year, which is a sufficient resource to finance the key needs of the state.
What do these funds bring to Ukraine?
According to Andriy Novak, the 90 billion euros allocated allow Ukraine to
- fully cover the state budget deficit;
- maintain the defense sector at the level of combat activity in 2025;
- plan budget and defense spending for two years in advance.
“And these amounts are quite enough to fully cover the huge deficit of the state budget of Ukraine and support Ukraine’s defense sector at the level of combat activity of today in 2025. This, above all, allows Ukraine to plan its budget expenditures for the next two years, including planning the necessary defense spending and, ultimately, to achieve victory over the enemy, over Russia,” the economist concludes.
Thus, the EU’s decision to provide 90 billion euros not only stabilizes Ukraine’s financial system, but also creates a strategic safety margin in the face of a protracted war and uncertainty about the timing of reparations from Russia.
