Scramble for Assets: In the struggle over the reparations loan, for the first time in recent history, Moscow and Washington acted in concert against America’s European allies and Ukraine

On the morning of 19 December, European leaders, having failed to persuade an intimidated Belgium to agree to a reparations loan for Ukraine secured by frozen Russian assets, approved a ‘Plan B’, a €90 billion borrowing programme that will provide the bulk of Ukraine’s financing over the next two years under any scenario, whether the conflict is halted or continues. This does not, however, mean abandoning the original idea. Russian assets will remain immobilised indefinitely, and the EU leadership considers their use legally justified should Russia fail to pay reparations for the damage inflicted on Ukraine.

The failure of the original plan to use Russian assets, or more precisely the need to postpone it, resulted from an unprecedented situation in recent history in which Washington and Moscow acted jointly against the interests of Europe and Ukraine, seeking to derail the European project to finance Kyiv. While Moscow intimidated the Belgian authorities and Euroclear, Washington exerted pressure on a number of European countries, demanding that they oppose the reparations loan. Although theTrump administration has fully shifted the financial burden of supporting Ukraine onto Europe, it has simultaneously sought to restrict Europe’s capacity to do so. A shortfall in funding for Kyiv was intended, first, to open the way to forcing Ukraine to sign a peace on unfavourable terms and, second, to facilitate a division of Russia’s frozen assets between Washington and Moscow.

This episode once again demonstrated that the negotiating track involving the special envoys Steve Witkoff and Kirill Dmitriev enables the Kremlin to manipulate the Trump administration and compel it to act in Russia’s interests, contrary to the interests of Ukraine and Europe.

The Reparations Loan: Confiscation or Security Measure?

As early as September and October, the plan for Europe to use frozen Russian assets to support Ukraine appeared sufficiently clear and realistic. Although the scheme could be regarded as legally imperfect, it seemed an adequate response to the force majeure of unprovoked Russian aggression, which eliminated the possibility of continuing previous legal relations in full. Indeed, this logic underpinned the very decision to freeze Russian assets. The fulfilment of obligations was deemed impossible due to extraordinary circumstances and was postponed until the situation was resolved.

The legal construction of the European ‘reparations loan’ was a further development of this logic. Russia, as the aggressor, bears responsibility for the damage caused to Ukraine and is obliged to compensate it. This position is ‘fixed’, inter alia, in UN General Assembly Resolution ES-11/5. However, Russia refuses to do so. In this situation, its assets held at the Euroclear depository become collateral for the satisfaction of a counterclaim, namely compensation for the damage inflicted on Ukraine. In this sense, the frequently used term ‘confiscation of assets’ reflects a Russian propaganda frame. The issue is not confiscation but the temporary use of funds to cover a counter-obligation that Russia seeks to evade, while at the same time demanding full performance of obligations owed to it. Russian funds are used on a temporary basis, until Russia’s corresponding obligations to Ukraine are fulfilled. This legal reasoning is reflected in a series of expert analyses, ranging from a report by the World Refugee and Migration Council prepared as early as 2022 to more recent publications by the Institute of Legislative Ideas, an analytical centre affiliated with the European Parliament, the Centre for Liberal Modernity and others.

At the initial stage of agreeing the plan, Belgium’s objections also appeared surmountable. Belgium hosts Euroclear, which holds the bulk of Russian assets. These objections boiled down to two main points. First, the decision to freeze Russian reserves is extended by EU member states every six months on the basis of consensus. However, the presence within the EU of at least two renegade states threatening to block such extensions, Hungary and Slovakia, creates a permanent risk that Russian assets could be unfrozen and would no longer be able to serve as collateral for the loan. To address this problem, on 12 December the EU decided to impose an indefinite freeze on the assets, using the procedure for emergency economic situations under Article 122 of the Treaty on the Functioning of the European Union. This procedure requires a qualified majority vote and thus allowed the vetoes of Russia’s allies to be bypassed. Belgium’s second objection was a demand for guarantees of joint liability by European countries for the risks that might arise for Belgium as a result of this decision. This objection also appeared reasonable and technically resolvable. The decision to use the assets should not be a Belgian decision but one taken by a coalition supporting Ukraine.

However, attempts by European countries to find a formula for such guarantees in November did not convince Belgium. Even so, the situation did not appear hopeless. A detailed legal justification for the use of the loan, EU joint guarantees and the mechanisms for deploying the funds was set out in a legislative proposal by the European Commission on 3 December.

Why Is a Reparations Loan Needed?

From a practical perspective, the plan to use Russian assets also appeared logical. Following Donald Trump’s refusal to support Ukraine, the burden has fallen almost entirely on European countries. In 2024, according to the Ukraine Support Tracker project, Ukraine received €96.5 billion in assistance, of which €46.2 billion came from the United States, €42.8 billion from Europe and €7.5 billion from other countries. Of this total, €81 billion was allocated between January and October 2024. This year, over 10 months, Ukraine has received €69 billion, 85% of last year’s level, of which €0.5 billion came from the United States, €60.3 billion from Europe and €8.6 billion from other countries. Europe has therefore largely succeeded in 2025 in replacing the lost US assistance. However, this task in the current cycle was facilitated by the ERA mechanism, which uses revenues from frozen Russian assets as collateral. The bulk of the funds under this scheme, around $40 billion, will be spent by the end of this year.

In turn, Ukraine’s resistance to Russian aggression in 2026 will require a broadly comparable amount, on the order of €90–100 billion. On 3 December, the Verkhovna Rada adopted the budget for next year with a deficit of $47.5 billion. Part of this deficit will be covered by the European Ukraine Support Fund and part by remaining balances under the ERA mechanism, which together are estimated at around $22 billion by Yurii Butsa, the Ukrainian government’s commissioner for public debt management. A new IMF lending programme will also be used. According to various estimates, between $18 billion and $23 billion of the future deficit remains uncovered at present. Liquidity problems caused by this shortfall could emerge from the second quarter of 2026, according to Ukrainian and European officials.

Beyond the missing amount needed to cover the budget deficit, a similar volume of funds, at least $40 billion, is required to meet Ukraine’s core military needs. These funds are provided primarily by the national governments of Ukraine’s partner countries. In 2024, such assistance amounted to €41 billion, with €33.4 billion provided between January and October. Although the Ukraine Support Tracker continues to sound the alarm over low monthly inflows of military assistance in the past four months, averaging €2.2 billion per month compared with €3.94 billion in January to June, overall military aid to Kyiv over 10 months of 2025 reached €32.5 billion. This is only slightly below last year’s level. To remain on track, Ukraine needs to receive an additional €7–8 billion for military purposes in November and December.

Following the December meeting of the Ramstein group, Ukraine secured pledges of allied military assistance for 2026 totalling around €21 billion. This includes both direct aid and participation in the PURL programme for the procurement of US weapons. The largest contributions will come from Germany, €11.5 billion for defence, primarily for strengthening air defence as well as for the procurement and production of drones and artillery shells, Norway, €6 billion through various programmes, and the United Kingdom, around €700 million to reinforce air defence. However, the ability of European countries to provide the full volume of assistance required in 2026 is in doubt, not only for the Ukraine Support Tracker. ‘Frozen assets could balance reductions in support in some countries,’ President Zelensky said recently. ‘I do not see how Ukraine can stand firmly without this.’ Indeed, spending on support for Ukraine has become a leitmotif of populist criticism of European governments, leaving national governments under growing pressure. In this context, the reparations loan scheme appears to be an optimal solution. It avoids provoking further political polarisation while reliably ensuring support for Ukraine and preventing Moscow from exploiting this factor to deepen divisions within Europe (→ Re: Russia: The second front in the war of attrition).

The reparations loan, however, had not only a tactical but also a strategic role in shaping the conditions for ending the war. Discussions over the past year have made it clear that Europe and the United States are unable to develop a package of credible security guarantees for Ukraine, whether in the form of a military contingent deployed on Ukrainian territory or commitments to enter the war in the event of a renewed Russian attack, modelled on Article 5 of the NATO Charter. In both cases, the risk of confrontation with a nuclear power has led both European governments and the US administration to retreat from offering full guarantees.

In these circumstances, the ‘steel porcupine’ strategy, that is arming Ukraine to a level at which renewed aggression would impose prohibitively high costs on Russia, appears to be a palliative but the most realistic scenario for strengthening Ukraine’s security. Its implementation, however, would require substantial Western investment in Ukraine’s military economy, and a reparations loan secured by Russian assets would have created precisely the reserve of funds needed for such investment (→ Re: Russia: Risks or money).

In other words, the reparations loan was intended to solve two tasks. First, to ensure current financing for Ukraine that would enable it to withstand continued Russian aggression next year, requiring around €40 billion in additional resources, and to create a foundation for financing in 2027. Second, to strengthen the country’s military potential, which would serve as an element of its security guarantees both in the event of continued aggression and in the event of a peace agreement.

Moscow and Washington Against Europe

The intrigue surrounding frozen assets has sharply intensified in recent weeks. One of the 28 points of a ‘peace plan’ drafted by the Kremlin representative Kirill Dmitriev for the special envoy Steve Witkoff mentioned that $100 billion of these assets would be used to create a US fund for Ukraine’s reconstruction, with 50% of the fund’s profits accruing to the United States. Europe, for its part, would be expected to add another $100 billion to the fund, apparently from its own resources. The remaining almost $200 billion of unfrozen Russian assets would be invested in some form of joint Russian American investment fund.

Although the plan appeared rather absurd and overtly anti-European, it soon became clear that it formed a strategic component of the Trump administration’s envisaged ‘peace deal’. According to Politico, as early as the summer US officials told the EU’s special envoy for sanctions, David O’Sullivan, of their intention to return frozen assets to Russia after the conclusion of a peace agreement. Judging by the timing, a separate plan to divide Russian assets frozen in Europe between Moscow and Washington became part of the ‘peace proposals’ discussed by Dmitriev and Witkoff during preparations for the Anchorage summit held on 15 August.

The idea of a reparations loan, articulated by Ursula von der Leyen in her State of the Union address on 9 September, thus emerged as a response to this plan, which would have deprived Brussels and Kyiv of control over the frozen assets and put them at the disposal of Moscow and Washington. However, as the deadline for decisions on financing Ukraine for the coming year approached, Europe found itself under growing, coordinated pressure from two sides, the Kremlin and Washington, which launched a joint effort to torpedo the European reparations loan plan. In recent weeks, the Trump administration has pressured European governments to abandon the plan, four EU officials involved in the discussions told Politico. The Washington Post reported the same, citing European sources, and a Ukrainian official made similar claims in an interview with the French television channel France 24. As a result of this pressure, opposition to the plan within Europe expanded to seven countries, Belgium, Hungary, Slovakia, Italy, Bulgaria, Malta and the Czech Republic, according to The Washington Post.

Moscow has also mounted an unprecedented pressure campaign against Europe in recent weeks. The Russian central bank filed a claim with the Moscow Arbitration Court against Euroclear, seeking compensation for alleged damages of more than 18 trillion roubles, $229 billion, ‘in connection with mechanisms under official consideration by the European Commission for the direct or indirect use of the assets of the Bank of Russia without the consent of the Bank of Russia’. The decision taken by the Moscow court will, of course, have no legal effect in Europe. However, the claim threatens retaliatory freezes of Euroclear’s assets and other European assets in Russia. According to the Associated Press, the total volume of the clearing house’s Russian assets amounts to approximately €17 billion. European decisions on assets already take this risk into account and assume that Euroclear would be compensated from Russian assets. Nevertheless, such threats influence a number of other European governments concerned about the risks hanging over large Russian assets held by their companies.

Russia has accompanied these legal measures with a campaign of direct intimidation of Belgian officials. According to The Guardian, citing European intelligence services, senior Belgian politicians and the management of Euroclear, including the head of the clearing house Valérie Urbain, have been subjected to intimidation by Russian military intelligence, the GRU. Threats against Urbain were made in 2024 and 2025, yet the Belgian police refused to provide her with protection, EUobserver reports. As a result, Urbain and other senior executives of the clearing house hired private bodyguards. Belgium’s prime minister, former Flemish nationalist Bart De Wever, said in an interview that he had received threats from Russia and that he would feel the consequences of the decision on the assets for the rest of his life.

Thus, for the first time in recent history, Europe is confronting a dual, coordinated attack by the Kremlin and the White House, which on this issue are acting as allies against it. In Washington’s view, the failure of the European scheme would deprive Ukraine of stable financing in 2026 and force it to concede to Putin’s demands by accepting an unfavourable peace. Europe, in turn, would be placed in an extremely vulnerable and humiliating position.

German Chancellor Friedrich Merz, speaking in the Bundestag ahead of the European summit and writing in the Frankfurter Allgemeine, stated that the issue at stake is not so much frozen assets as European security and sovereignty, Europe’s independence and its ability to act autonomously. It is hard to disagree. A European retreat under the combined pressure of Moscow and Washington would in effect put an end to its efforts to assert its own agency in determining Ukraine’s future and its own, efforts it pursued for much of 2025.

On the morning of 19 December, it became clear that European leaders had failed to persuade an intimidated Belgium to agree to the reparations loan plan and had adopted ‘Plan B’. This envisages financing Ukraine through joint borrowing by EU member states on capital markets, backed by guarantees from the Union’s seven year budget. The volume of financing will amount to €90 billion, $105 billion, and will cover two thirds of the required funding for 2026 to 2027. At the same time, Russian assets remain ‘immobilised indefinitely’ in line with the decision adopted under Article 122 TFEU. Repayment of the loan provided to Ukraine remains conditional on reparations payments by Russia, and the EU reserves the right to use Russian assets for repayment until Russia fulfils its obligations. In other words, the EU has not abandoned the basic structure of the reparations loan and has not given up on persuading Belgium and developing a system of guarantees acceptable to it. Market borrowing is viewed as a temporary measure to substitute for Russian assets, the mechanism for whose use has not yet been agreed. The struggle over frozen assets has meanwhile, for the first time, so clearly revealed the existence of two opposing forces. On one side stands a collusion between Moscow and Washington, acting in concert and against Europe’s interests. On the other stands the alliance of Ukraine and Europe.