EU moves closer to using Russian assets to rebuild Ukraine

BRUSSELS ― The European Commission is devising a scheme to transfer almost €200 billion in Russian immobilized assets to rebuild Ukraine at the end of the war.

Brussels is testing the appetite of national capitals for moving the assets into riskier investments that could generate more profits for Ukraine and amp up pressure on Russia as it refuses to stop the fighting, several officials told POLITICO.

Supporters also see the scheme as a step toward potentially seizing the assets and handing them over to Ukraine as a punishment for Russia’s refusal to pay post-war compensation.

“We are advancing the work on the Russian frozen assets to contribute to Ukraine’s defense and reconstruction,” the Commission President Ursula von der Leyen said on Thursday, in her strongest remarks so far on the subject.

Crucially, this option would fall short of immediately confiscating the assets, which a majority of EU countries oppose due to financial and legal concerns.

Talks will come to a head on Saturday when the EU’s 27 foreign ministers debate the option for the first time during an informal gathering in Copenhagen, Denmark.

During the discussion, ministers should look at “further options for the use of revenues stemming from Russian immobilized sovereign assets,” according to a preparatory note seen by POLITICO.

With Ukraine facing an estimated €8 billion budget shortfall in 2026, EU countries are looking for new ideas to continue funding the war-battered country amid squeezed domestic budgets and no room to issue EU-wide debt.

Despite its economic predicament, Europe faces increased pressure to step up in the face of U.S. disengagement from Ukraine and faltering attempts by President Donald Trump to reach a peace deal.

“We hear that it’s more difficult to raise money [from national finances or the EU budget],” said Kerli Veski, the undersecretary for legal and consular affairs at the Estonian foreign ministry. “[But] we have those assets there and the logical question is how can we and why don’t we use those assets.”

The confiscation camp

Baltic countries bordering Russia and several others have long been pushing on the EU to confiscate the assets altogether.

Within the Commission, Latvian Economy Commissioner Valdis Dombrovskis and Estonian Foreign Policy Chief Kaja Kallas have been advancing this idea.

But this option continues to be met with resistance from Western European countries, including Germany, Italy and Belgium. The latter is particularly exposed to the legal and financial risks because it hosts Euroclear, the financial institution that holds the bulk of the Russian assets.  

As a compromise, G7 countries in 2024 agreed to funnel a total of €45 billion in profits generated by investing the assets to Ukraine, while leaving the underlying assets untouched.

Nevertheless, the EU’s €18 billion share of the loan will be entirely paid out by the end of the year ― prompting calls to generate additional revenues within a short timeframe.

As a workaround, the Commission’s lawyers are looking into transferring the assets into a “special purpose vehicle” backed by a number of EU and potentially foreign countries.

Officials compared the mooted new fund to the European Stability Mechanism (ESM), a money pot to bail out countries that is only backed by eurozone members and was set up outside the EU treaties.

The potential fund for Ukraine would also be open to G7 countries, including the U.K. and Canada, that are in favor of confiscating the assets, said an EU official, although the details are still being hammered out.

Overall, this new structure would give the EU greater control to hand over the assets to Ukraine when the time is right.

Under the current rules, a single country can effectively hand the assets back to Moscow by vetoing the renewal of sanctions, which comes up for a vote every six months. Hungary’s pro-Russia and pro-Trump government is seen as the likeliest to take this course.

Shifting the funds to a new body with potentially no unanimity requirements would stave off Hungary’s threat.

Buy low, sell high

Transferring the assets into a new fund would also allow them to be placed in riskier investments capable of generating higher returns for Ukraine.

That would be a change from the current rulebook, which compels Euroclear to invest the assets with the Belgian central bank, which offers the lowest risk-free rate of return available.

Skeptics, including Euroclear CEO Valérie Urbain, worry, however, that EU taxpayers would have to bear the brunt of any losses resulting from the riskier operations.

To share the legal and financial burden, Belgium wants other EU countries to assume liability for the assets under the Commission’s proposed plan.

“Belgium is not alone here. We need to support and be taking part in mitigating that risk,” said Veski.

“It’s not a question of letting Belgium deal with it [while] we watch from the sideline.”

The Belgian government has recently warmed to the Commission’s plan, said an EU official and a senior non-Belgian diplomat, while countries farther away from Russia, such as Spain, are also backing the idea.

Jacopo Barigazzi contributed reporting.