How the EU wants to use Russian assets to fund Ukraine

EU leaders on Thursday took a cautious first step towards using Russian frozen assets to provide a mammoth new loan for Ukraine -- though marathon talks in Brussels failed to produce a clear green light.

The so-called "reparation loan" is seen as crucial to helping keep Kyiv in the fight against Moscow and making the Kremlin pay -- but it is fraught with legal and political perils.

To get around them, the European Commission has floated a complex scheme it says could hand 140 billion euros ($162 billion) to Kyiv over the next few years.

Here's what is at stake and how it could work: What's happened?
The EU froze some 200 billion euros of Russian central bank assets after Moscow's tanks rolled into Ukraine in 2022.

The vast majority are held in international deposit organisation Euroclear, based in Belgium.

G7 countries have already used the interest of the frozen assets to fund a $50-billion loan for Ukraine.

But as Russia's war drags on through a fourth year -- and support dries up from Washington -- Kyiv's backers are now looking to go further to help plug its budget. What's the plan?
While more hawkish countries in the EU have called to just seize the Russian assets outright, that is a red line for many others.

To get around that, the European Commission, the EU's executive, has floated a financial switcheroo that it insists does not touch the Russian sovereign assets.

Instead, under the proposal the EU would borrow funds from Euroclear that have matured into cash.

That money would then in turn be loaned to Ukraine, on the understanding that Kyiv would only repay the loan if Russia coughs up for the damage it has wrought.

The scheme would be "fully guaranteed" by the EU's 27 member states -- who would have to ensure repayment themselves to Euroclear if they eventually decided Russia could reclaim the assets without paying reparations. Belgian demands?
Belgium has been the most vocal sceptic of a plan it fears could open up the country to costly legal challenges from Russia.

Prime Minister Bart De Wever has insisted that to move ahead Belgium needs firm guarantees from all other EU states that they will share the liability if Moscow comes calling.

He also wants other countries in the bloc to promise to start tapping Russian assets frozen in their territories.

He warned at Thursday's summit that unless those conditions were met, he would do all in his power "politically and legally, to stop this decision".

What's next?
Thursday's summit conclusions -- adopted by all member states with the exception of Hungary, seen as Russia's closest ally in the 27-nation bloc -- had to be watered down in light of objections from Belgium.

The text did not mention the loan directly, instead inviting the commission to present "options for financial support" for Ukraine for 2026 and 2027 -- to be presented to leaders at their next summit in December.

There is certain to be lengthy wrangling over the small print of any proposal, with lawyers poised to go through it with a fine-tooth comb.

One key sticking point could be the conditions for how the funds can eventually be spent by Kyiv.

France is insisting that the bulk of the funds go to buying weapons from within Europe, as it seeks to bolster the EU's defence industry.

The commission has backed that argument for now but other member states insist the focus should be on allowing Kyiv to get what it needs to fight Moscow, wherever it comes from.

That could also help to keep US President Donald Trump on side by pumping some of the funds to buying American weaponry.