Next week will be crucial for the European Union in finding a way to finance Ukraine for the next two years, as EU leaders meet in Brussels on December 18–19.
A key part of this package is the so-called compensation loan for Kyiv. According to Radio Free Europe (RFE), the loan would use the monetary value of frozen Russian state assets in the EU, converting them into a compensation loan for Ukraine. Kyiv would repay the loan only if Russia pays war damages—a scenario considered unlikely.
The International Monetary Fund (IMF) estimates Ukraine needs around €135 billion over the next two years to cover a projected budget gap of €71.7 billion next year, with funds required by April 2026. While Western countries have supported Ukraine with direct budget aid and military assistance since the start of Russia’s full-scale invasion nearly four years ago, the coming period could be different, as the United States has indicated it may no longer provide additional funds.
The EU plans to issue bonds backed by member states and potentially willing non-EU countries. Legal experts in Brussels suggested using Article 122 of the EU Treaty to bypass potential opposition from member states like Hungary and Slovakia, allowing decisions by qualified majority instead of unanimity.
The total value of Russian assets held in the EU is roughly €165 billion, with about €140 billion in Euroclear (Belgium) and €25 billion in banks across the EU. The compensation loan is part of a broader €210 billion package, which also includes €45 billion from a G7 loan for 2024 and €90 billion from the EU for 2026–2027.
Belgium, hosting most of these assets, has expressed strong concerns, demanding explicit financial guarantees in case Russia recovers any funds. Germany has indicated it could cover around 25% of the support, but wider participation is needed. The European Commission also plans a “liquidity mechanism” to ensure governments can meet guarantees immediately if required.
If disagreements persist, the EU could consider alternatives: issuing joint EU debt or having member states provide funds directly. However, political and legal challenges remain significant, and the plan could be contested in EU courts.
