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EU Considers Reparations Loan for Ukraine Based on Frozen Russian Assets
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![Photo of Maryna Kulakova]( "Photo of Maryna Kulakova")
The European Commission will factor in the International Monetary Fund's (IMF) assessment of Ukraine's financial needs for the next two years when determining the size of the EU's Reparations Loan to Kyiv, as reported by Reuters on September 19, citing European Commissioner for Economy Valdis Dombrovskis.
The European Union is discussing using frozen Russian assets to secure a loan, helping support Kyiv’s finances amid reduced US military aid.
"What the Commission is proposing is a reparations loan, so basically providing a loan to Ukraine by using cash balances of immobilized Russian assets without... touching Russia's claim on those assets," Dombrovskis said.
Discussions are focused on the loan's details, timing, and amount. The IMF’s assessment of Ukraine’s needs will be key, with the Fund nearing completion of its work.
Spanish Finance Minister Carlos Cuervo stated the European Commission's proposal is expected in October, adding, "From the Spanish perspective, we will be supportive."
The G7 holds about $300 billion in frozen Russian assets, much of it in Europe. Euroclear in Belgium has €194 billion ($208 billion) frozen, with €170 billion ($183 billion) already converted into cash reserves.
Dombrovskis noted the mechanism could be applied across all G7 countries holding Russian assets and has been discussed with G7 finance ministers.
Ukraine will start repaying the loan after receiving reparations from Russia. Loan risks will be shared by EU member states, according to Reuters. Sources say the scheme involves replacing frozen Russian assets with European Commission bonds backed by EU country guarantees.
EU officials involved in the discussions stated that the plan would replace Russian assets held in Europe with zero-coupon bonds issued by the European Commission. These bonds would be backed by guarantees from either all EU countries or just those willing to participate. The politically risky aspect of the proposal lies in the government guarantees, which could be called upon if Russia asserts claims once EU sanctions on Moscow are lifted.
Belgian Finance Minister Vincent Van Peteghem expressed skepticism, calling the proposal "rather vague" and emphasizing the need for the risks to be shared across all EU member states.
Previously, it was reported that Brussels is drawing up plans to channel frozen Russian assets into Ukraine through a new system of “reparation loans,” worth as much as $180 billion, according to the Financial Times on September 17.
