October 20, 2025
"Possible collapse of Ukraine": the European Commission explained why a reparation loan and how it can be provided thumbnail
Economy

“Possible collapse of Ukraine”: the European Commission explained why a reparation loan and how it can be provided

“The key idea is that we instruct EuroClear to invest cash in the European Central Bank””, — write: www.radiosvoboda.org

Ukraine should be provided with resources so that it can continue to resist Russian aggression, so the European Commission is working on a reparation loan for Ukraine, which should be based on frozen Russian assets. An official of the European Commission informed journalists about this on the condition of anonymity, according to a correspondent of Radio Liberty in Brussels.

The official cited data from the International Monetary Fund, according to which in 2026-2027 Ukraine needs about 52 billion euros of budget support, and this estimate does not take into account the needs of the Armed Forces.

“So, the sums are quite significant, and depending on the forecast for hostilities, they can easily increase to about 80 billion over the next two years… Failure to provide support will most likely lead to the collapse of Ukraine, which, in our opinion, will pose a serious threat to the security of Europe,” the European Commission official emphasized.

The interlocutor of the journalists noted that currently the EU “cannot count on the USA to provide significant amounts.” Therefore, the importance of using frozen Russian assets to help Ukraine, while “not violating international law”, has increased.

“We believe we have found a way to do this, and it is very important to say right away that we are not proposing confiscation under any circumstances,” the official said.

According to him, it is about borrowing funds from the Euroclear depository.

“The key idea, which is to some extent very simple, is that we give an indication to EuroClear (to the Belgian Securities Depository – ed.) invest cash (accumulated thanks to the bonds of the Russian Federation – ed.) to the European Central Bank… The EU will use these funds to grant Ukraine a loan with limited recourse, which means that Ukraine will have to repay the debt only after Russia compensates for the damage caused by military aggression,” the official emphasized.

He recalled the decision of the EU summit in October 2024, in which the leaders agreed that the assets of the Russian Federation should remain immobilized as long as Russia’s aggression against Ukraine continues and until Moscow compensates for the damage caused. Under such conditions, the official stressed, the risks are “limited”.

Read also: Mertz expects a decision on the use of Russian assets in three weeks

“As long as the member states do what they promised, namely: remobilize assets, if Russia pays the damages, this risk will not materialize,” said the interlocutor of the journalists.

If Ukraine receives reparations from Russia, it will return the loan granted to it, then the EU, in turn, will return the funds to the Euroclear depository, and he will return the funds to Russia. Thus, there will be no need for guarantees from member states.

If Russia does not pay reparations, the assets will in turn remain immobilized, as EU leaders have decided, and thus there will be no need for a guarantee either.

“Only if member states voluntarily decide to remobilize assets, i.e. lift sanctions in a situation where the stated condition for the lifting of these sanctions is not met… then obviously this will lead to the application of the guarantee. But it is very important to say that the member states themselves decide whether they want to cancel it at that time and accept the consequences also in financial terms,” ​​explained the European Commission official.

The European Commission is currently negotiating with the member states regarding the format of the reparation loan for Ukraine. A specific proposal can be formulated after the summit of EU leaders scheduled for the end of October.

EU sanctions imposed at the start of Russia’s full-scale invasion of Ukraine keep Russian assets immobilized. To keep them in this state, the European Commission proposes to extend the restrictions, which is necessary twice a year, not unanimously, but by a qualified majority.

When asked by journalists why this mechanism was not used earlier, if it is legally possible, the official of the European Commission noted that “this is not a step that is taken lightly.”

The amount of cash accumulated thanks to the bonds of the Russian Central Bank in the Belgian central depository Euroclear is about 176 billion euros. These funds are not returned to Russia in connection with the sanctions introduced by the European Union in response to its full-scale invasion of Ukraine. The idea of ​​providing a reparation loan to Ukraine is thatto transfer this cash to the EU, which will “enter into an individual debt contract with Euroclear at 0% per annum.”

Brussels will use these funds to finance a loan to Ukraine, which it, in turn, will return only if Russia compensates for the damages caused to it. The Kremlin condemned this idea as “pure theft.”

On September 30, Russian President Vladimir Putin, in turn, signed a decree on a new procedure for the sale of federal assets. According to Bloomberg, Russia is ready to nationalize and quickly sell off foreign assets in response to a possible withdrawal of their funds abroad.

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