European Union leaders agreed overnight to provide Ukraine with a €90 billion financial package for 2026–2027, settling on EU-backed borrowing after failing to secure consensus on using immobilised Russian sovereign assets as the primary funding mechanism.
The agreement, struck after talks that continued into the night, provides an interest-free €90 billion loan to Ukraine, split into €45 billion for each of the next two years. EU leaders presented it as a stopgap to sustain Ukraine’s public finances and defence spending as the war nears its fifth year, amid continuing uncertainty over the scale and timing of future US support.
The summit exposed continuing divisions over how far the EU should go in converting frozen Russian reserves into direct support for Kyiv. Around €210 billion in Russian central bank assets are immobilised in the EU, the largest share held in Belgium through Euroclear, a major securities depository and settlement institution. Several member states, led by Belgium, argued that directly deploying these assets for a “reparations loan” would carry legal and financial risks, including potential claims against Euroclear and possible retaliation against European interests in Russia.
Those concerns sharpened after Russia’s central bank filed a lawsuit in a Moscow court seeking roughly $230 billion in damages from Euroclear, in what has been widely interpreted as an attempt to raise the cost of any EU move that relies on immobilised Russian reserves.
In parallel, the EU has moved to reduce the risk that the assets could be released through routine sanctions renewals. On 12 December, the Council adopted an emergency measure to prohibit transfers of immobilised Russian central bank assets back to Russia, using Article 122 of the Treaty on the Functioning of the European Union, which allows action in situations of severe economic difficulty and can be adopted by qualified majority. EU officials described the step as necessary to protect financial stability and prevent sudden asset outflows.
Against that backdrop, the Commission and several capitals had pushed for a financing model that would be explicitly anchored in the Russian assets, on the argument that the reserves should ultimately cover Ukraine’s costs and reduce the burden on EU taxpayers. Draft texts discussed by leaders included proposals for guarantees to cover potential losses if legal claims succeeded, with Belgium seeking broad protection for itself and for Euroclear. Diplomats reported that the scale and open-ended nature of these guarantees proved difficult to accept for other governments.
The compromise was to borrow in capital markets, backed by the EU budget, allowing funds to be mobilised without first resolving the asset-use dispute. Under the political understanding described by several outlets, Ukraine would repay the loan only if Russia pays reparations; otherwise, the EU would retain the option of turning to immobilised Russian assets at a later stage to cover repayment.
Hungary, Slovakia and the Czech Republic opposed elements of the package but ultimately did not block it after securing assurances that they would not be exposed to financial liabilities from loan guarantees. This “opt-out” approach allowed leaders to maintain unanimity in the summit conclusions while avoiding a direct confrontation over burden-sharing.
For Ukraine, the immediate significance is predictability. The European Parliament’s research service has warned that Kyiv faces a sizeable external financing gap in 2026, with only part of its projected international support firmly committed. EU officials say the two-year package is designed to prevent a fiscal crisis that could disrupt public services and defence procurement.
The broader question — whether and how the West will ultimately convert Russia’s immobilised reserves into support for Ukraine — remains unresolved. EU leaders signalled that they will continue work on options involving Russian assets, while urging key partners outside the bloc to maintain aligned policies. In London, the UK has reported tens of billions of pounds in frozen Russian-linked assets since 2022, and debate continues among G7 states over the legal route from immobilisation to use.
For now, the EU has chosen speed over legal innovation: a large, market-funded loan that keeps Ukraine financed into 2027, while leaving the politically charged issue of Russian reserves as an unresolved, but increasingly central, part of Europe’s long-term strategy.
