EDITOR'S CORNER: Why Europe Can’t Agree on Russia Funds

This week proved to be a pivotal one for the European Union, as leaders gathered for the European Council Summit on 18 and 19 December. The most anticipated question was whether Europe would use the €210 billion of Russian funds frozen in Euroclear to support Ukraine. European leaders debated the issue at length, with a few unexpected moments along the way. The final decision may not have been entirely surprising, yet it still carried elements of unpredictability.

In this blog post, we’ll take a closer look at what happened during the summit and explore its potential impact.

FUNDS FROZEN, A LONG AWAITED DECISION

At the same summit, EU leaders also decided to freeze Russian state assets held at Euroclear indefinitely. This concerns roughly €210 billion in assets belonging to the Russian central bank, which had already been frozen under EU sanctions following Russia’s invasion of Ukraine in 2022.

Previously, the freeze had to be renewed every six months by unanimous agreement, creating the risk that a single member state could block renewal and allow the assets to be unfrozen. To eliminate this risk, EU leaders agreed to remove the automatic expiry, keeping the assets immobilized until Russia ends its aggression and pays reparations.

The decision was formally implemented by the Council of the European Union through an amendment to the existing sanctions regime. The EU did not confiscate the funds or transfer ownership; the assets remain legally Russia’s property but cannot be accessed, moved, or used while the sanctions are in force.

This move is particularly important because countries like Hungary, and potentially Slovakia, had the power to block the six-month renewals. If that had happened, the assets could have been returned to Russia, giving a significant boost to Putin’s war effort.

CAN WE USE THE MONEY?

At the European summit, EU leaders faced a major challenge over how to support Ukraine using frozen Russian assets held in Europe. Legal and political obstacles, particularly opposition or concerns from Belgium, Hungary, Slovakia, the Czech Republic, and Italy, made it impossible to use these funds directly. Belgium cited legal and financial risks, warning that using the assets could expose EU member states to lawsuits and complicate the financial system. Hungary, Slovakia, and the Czech Republic were concerned about potential impacts on their national budgets and demanded guarantees that any support would not affect their fiscal positions. Italy, while backing sanctions against Russia, emphasized that any use of the frozen funds must have a solid legal basis and avoid creating legal or financial risks for EU countries.

As a result, the assets remain immobilised indefinitely, and any attempt to access them for Ukraine’s benefit would require complex legal frameworks and unanimous agreement from all member states. To provide immediate support, the EU agreed on a 90 billion euro loan for Ukraine covering 2026–2027, financed through joint EU borrowing on capital markets backed by the EU budget. This package allows Ukraine to meet urgent budgetary, military, and reconstruction needs while avoiding the legal and political complications of using the frozen Russian assets.

The decision was broadly supported across the EU, though the countries that had expressed caution secured assurances that the borrowing would not affect their national budgets. Leaders stressed that the package underscores the EU’s continued commitment to Ukraine’s sovereignty, defence, and long-term security, while preventing the frozen assets from ever being returned to Russia and potentially boosting Putin’s war efforts.

MY OPINION 

In my view, Europe needs to start thinking about how to use those frozen Russian assets in the longer term. Supporting Ukraine through loans and other measures that impact the budgets of already struggling European nations will not remain popular with citizens indefinitely. While we want to help Ukraine fight, maintain its administration, and keep the country running, rising support for right-wing populists and Russian propaganda could lead public opinion to turn against further aid. If that happens, Ukraine may be forced into a peace deal that is compromised and unfavorable.

The situation also underscores the ongoing danger to Europe itself. Vladimir Putin has made it clear that he intends to continue the war if diplomatic solutions fail, and his demands remain uncompromising. Just recently, he sharply criticized European leaders, calling them “pigs” and accusing them of trying to profit from Russia’s decline. Speaking at a defence ministry meeting in Moscow, he blamed Western governments for the Ukraine conflict and warned that, if diplomacy fails, Russia would pursue its goals by force. His remarks were widely seen as both a rhetorical attack on EU unity and an attempt to influence debates over the frozen Russian assets and support for Ukraine.

CONCLUSION

The EU’s decision to provide a 90 billion euro loan instead of using frozen Russian assets highlights the complex legal and political challenges of supporting Ukraine. While the loan ensures Ukraine can meet its urgent budgetary, military, and reconstruction needs, tensions remain high, especially in light of Putin’s recent attacks on European leaders. 

The situation also highlights the ongoing geopolitical risks and the critical importance of EU unity in navigating both the war in Ukraine and the broader strategic challenges facing Europe.