EU agrees to indefinitely freeze Russian assets, removing obstacle to Ukraine loan

BRUSSELS – The European Union agreed on Dec 12 to indefinitely freeze Russian central bank assets held in Europe, removing a big obstacle to using the cash to help Ukraine defend itself against Russia.

The EU wants to keep Ukraine financed and fighting, as it sees Russia’s invasion as a threat to its own security. To do so, EU states aim to put to work some of the Russian sovereign assets they immobilised after Moscow’s 2022 invasion of Ukraine.

A first big step, which EU governments agreed to on Dec 12, is to immobilise €210 billion (S$318 billion) worth of Russian sovereign assets for as long as needed instead of voting every six months on extending the asset freeze.

This removes the risk that Hungary and Slovakia, which have better ties with Russia than other EU states, could refuse to roll over the freeze at some point, forcing the EU to return the money to Moscow.

Planned loan to Ukraine

The indefinite asset freeze is meant to help convince Belgium to support the EU’s plan to use the frozen Russian cash to extend

a loan of up to €165 billion

to Ukraine to cover its military and civilian budget needs in 2026 and 2027.

Ukraine would pay back the loan only when Moscow pays Kyiv war damages, making the loan effectively a grant that advances future Russian reparations payments.

EU leaders – the European Council – are

to meet on Dec 18 to finalise details of the reparations loan

and resolve remaining problems, which include guarantees from all EU governments for Belgium that it would not be left alone to foot the bill should a potential Moscow lawsuit prove successful.

Before that, Ukrainian President Volodymyr Zelensky will visit Berlin for talks with German Chancellor Friedrich Merz on Dec 15, with further European, EU and NATO leaders joining them later, the German government said.

Germany sees no alternative to the reparations loan and would provide €50 billion in guarantees, European diplomatic sources said.

Danish Finance Minister Stephanie Lose, whose country holds the rotating EU presidency, told reporters “some worries” still needed to be addressed but “hopefully we’ll be able to pave the way towards a decision at the European Council next week”.

European Commissioner for Economy Valdis Dombrovskis said

solid guarantees were being put together for Belgium.

Suing Euroclear

Hungarian Prime Minister Viktor Orban said on Facebook that he believed the EU move to freeze Russian assets indefinitely via a qualified majority vote – requiring the support of 15 of the 27 states representing 65 per cent of the EU population – would cause irreparable damage to the bloc, adding that Hungary would do all it could to “restore a lawful state of affairs”.

Russia’s central bank said the EU plans to use its assets were illegal and reserved the right to use all available means to protect its interests – remarks shrugged off by Mr Dombrovskis.

The bank said it was suing the Brussels-based central securities depository Euroclear – which holds €185 billion of the total assets frozen in Europe – in a Moscow court over what it said were damaging actions, affecting its ability to dispose of its funds and securities. Euroclear has been subject to Russian lawsuits in Moscow courts since the EU froze the assets in 2022.

EU accession talks

The Financial Times reported that Ukraine could join the EU by Jan 1, 2027, under

proposals being discussed in US-mediated talks

on ending the war.

Talks on EU accession, a long-held goal for Kyiv as it seeks to move further out of Moscow’s orbit, usually take many years.

A European diplomat briefed on the plan said Ukrainian accession would be “extremely difficult” to achieve by 2027 and it was not clear whether the EU leadership backed this. Several other European officials and diplomats said the target date was “absolutely impossible”. REUTERS