EditEU pivots to plan B: joint borrowing for Ukraine, shelving frozen Russian assets plan
The compromise reached during the night prioritises immediate certainty over innovative but risky financing, buying time in an uncertain geopolitical landscape
In a significant policy reversal, European Union leaders in the early hours on Friday abandoned their initial push to finance Ukraine’s defence and reconstruction through profits from frozen Russian central bank assets, opting instead for a €90 billion ($106 billion) loan raised via joint borrowing on capital markets – secured against the EU budget – to cover Kyiv’s needs for 2026-2027.
“We have a deal. Decision to provide 90 billion euros of support to Ukraine for 2026-27 approved,” Council President António Costa announced on social media, following exhaustive overnight negotiations that stretched the two-day gathering.
The shift marks a tactical retreat from the Commission’s preferred reparations-style loan backed by frozen Russian funds, amid insurmountable legal, political, and technical hurdles at this stage.
EU leaders push for breakthrough on Ukraine funding via frozen Russian assets as summit drags on
The summit conclusions specify that the funding will come from market borrowing, with exemptions for Hungary, Slovakia, and the Czech Republic – countries reluctant to contribute to Ukraine’s war effort.
Work on an asset-based loan will continue in parallel, but leaders effectively parked the idea for now, reserving the right to use the frozen reserves as ultimate collateral if Ukraine receives reparations from Moscow post-war.
Until then, the €210 billion in Russian assets – mostly held at Belgium’s Euroclear – remain frozen, generating annual profits of €15-20 billion that could still factor into future schemes.
The pivot reflects the complexity of harnessing the assets without exposing the EU to Russian retaliation, including lawsuits like the Russian central bank’s €230 billion claim against Euroclear filed this week.
Belgium, hosting €185 billion of the funds, demanded robust guarantees against legal and liquidity risks, with Prime Minister Bart De Wever telling parliament on Thursday that proposed safeguards fell short.
“We have gone from saving Ukraine to saving face, at least that of those who have been pushing for the use of the frozen assets,” one EU diplomat quipped, highlighting the political climbdown.
Hungarian Prime Minister Viktor Orbán emerged as a key beneficiary, securing his country’s opt-out from debt guarantees while blocking the asset route he deemed a “dead end.”
“Orban got what he wanted: no reparation loan. And EU action without participation of Hungary, Czech Republic and Slovakia,” a diplomat noted. Orbán’s stance, often aligned with Moscow, had threatened unanimity required for joint borrowing, but concessions appeased him without derailing the deal.
Ukrainian President Volodymyr Zelenskyy, who attended part of the summit, had urged leaders to seize the assets outright, calling it “one of the clearest and most morally justified decisions.”
In a post-summit statement, he welcomed the funding but expressed disappointment over the sidelined asset plan, emphasizing that “Russia must pay for its aggression.”
EU foreign policy chief Kaja Kallas stressed the urgency: “We just can’t afford to fail,” amid fears Ukraine could run out of money by Q2 2026 without aid.
The EU’s change in tack comes as U.S. President Donald Trump’s administration signals a rapid peace push, potentially curtailing American support – prompting Europe to step up.
Commission President Ursula von der Leyen hailed the agreement as demonstrating Europe’s resolve, countering Trump’s recent jibe at the bloc’s “weakness.” She insisted that the loan for Ukraine is tied to future reparations from the Russian aggressor.
Germany’s Chancellor Friedrich Merz, a strong proponent of the asset route, conceded the borrowing compromise as a “pragmatic step” to ensure timely aid.
But is €90 billion sufficient for Ukraine’s needs over the next two years? Experts and estimates suggest it’s a vital lifeline but falls short. The International Monetary Fund projects Ukraine requires €137 billion ($161 billion) in external financing for 2026-2027 to cover budget deficits, military expenditures, and reconstruction amid ongoing war.
Ukraine’s 2026 budget alone anticipates a €38 billion deficit, with total expenditures at €97.1 billion against €59.1 billion in revenues.
EU officials estimate Kyiv needs an extra €135 billion over the period for survival.
At first sight, the €90 billion – roughly €45 billion annually – could cover core budgetary and military gaps only if supplemented by bilateral aid, IMF loans, and potential future asset profits.
However, with inflation, escalating frontline costs, and energy infrastructure repairs, it may prove inadequate without escalation in fighting or peace breakthroughs.
“It’s good in the sense that Ukraine will secure funding for 2 years,” one diplomat said, , framing the compromise in cautiously optimistic terms – as a glass half-full amid the bloc’s intricate negotiations.
With Reuters, Suspilne and European Pravda.
Caption: European Council on 18 December, Roundtable with Ukrainian President President Volodymyr Zelenskyy [Council Newsroom]
Updated: December 19, 2025 - 07:56
