Mette Frederiksen arrives at the informal European Union Council meeting in Copenhagen. Photo / Nichlas Pollier, Bloomberg via The Washington Post
European Union leaders are building momentum for a plan to provide Ukraine with €140 billion ($282b) in loans from immobilised Russian central bank assets at a summit in Denmark.
Backing for the long-standing proposal to leverage the assets has gained traction after the United States halted its direct support for Ukraine, leaving Europe to shoulder the burden for the war-battered nation’s financial needs.
“When Russia chooses to attack Europe, there is a large bill to pay,” Danish Prime Minister Mette Frederiksen told reporters ahead of the meeting in Copenhagen today, as she backed a European Commission proposal to deploy the funds for Ukraine’s military as well as reconstructions.
“But the intention is that the Russians will be the ones to pay,” she said.
German Chancellor Friedrich Merz last week threw his weight behind the idea, lending the support of the EU’s biggest economy to the plan, in what amounted to a shift in stance after Berlin had touted legal concerns.
In an op-ed published in the Financial Times, Merz said the EU must “systematically and massively raise the costs of Russia’s aggression”.
The commission, the EU’s executive arm, presented capitals with the frozen-asset blueprint late last week in the hopes of securing support before a formal EU summit at the end of this month.
Member states including Belgium and France want to see details on the plan’s legal basis and other logistics ironed out before moving forward.
“We must remain an attractive and reliable place, as the EU, which means that when assets are frozen, international law is respected,” French President Emmanuel Macron told reporters. “We must give Ukraine visibility in terms of financing.”
Luxembourg’s Prime Minister, Luc Frieden, said seizing assets from another state presents a “difficult legal question”.
Kremlin spokesman Dmitry Peskov called the EU asset plan an “illegal seizure of Russian property, theft”. Those participating will be prosecuted, he said, according to the state-run Tass news agency.
Separately, Group of Seven finance ministers were to discuss tapping Russian assets in a call today seeking a joint approach to using the move to increase economic pressure on Russia.
The proposal foresees the use of the funds raised from the approximately €180b in Russian assets held at Brussels-based clearing house Euroclear. The financing would be gradually redirected to the EU to enable it to issue loans in tranches to Kyiv.
The EU has proposed a “tailored debt contract” with the clearing house with a 0% interest rate to ensure it can honour any potential future Russian claims.
Kaja Kallas, the EU’s top foreign policy official, said she wouldn’t set a deadline for reaching consensus on the plan, though she’s pushing ahead “as fast as possible”.
“It’s not supported by everybody yet - so, there is still a lot of work to do,” Kallas said.
It would be guaranteed by member states - and the EU is hoping to have the loan arrangement in place by the end of the year to begin issuing funds to Ukraine in 2026.
The International Monetary Fund forecasts a US$65b financing gap to 2027. Ukraine has also requested US$60b for defence over the next year.
The IMF persuaded Kyiv this month to significantly increase its projections for funding needs into 2027 to reflect the protracted war, well into its fourth year.
Kyiv would only have to pay back the loan - which the EU would then repay to Euroclear - if Moscow agrees to pay reparations to Ukraine, according to the proposal.
Merz, who gave brief remarks entering the summit, said last week that Germany remains cautious on the issue of confiscating assets - with international law as well as the euro’s role as a global reserve currency at stake.
“But this must not hold us back,” the Chancellor wrote in the FT.
Russia may nationalise and swiftly sell off foreign-owned assets under a new privatisation mechanism in retaliation for any European moves to seize Russian holdings abroad, according to a person close to the government.
President Vladimir Putin on Wednesday signed an order allowing for fast-track sales of state-owned assets under a special procedure.
The decree is intended to speed up the sale of various companies, both Russian and foreign, the person familiar with the matter said, asking not to be identified because the information isn’t public.
Should the EU begin seizing Russian assets, Moscow may respond with symmetrical measures, the person said.
Hundreds of Western companies working in sectors from banking to consumer goods still operate in Russia, including UniCredit SpA, Raiffeisen Bank International AG, PepsiCo Inc, and Mondelez International Inc.
The Russian decree limits pre-sale valuations to 10 days and speeds up state registration of ownership, according to the document published on the Government’s website.
State-owned Promsvyazbank PJSC was appointed to handle such deals, and Putin’s order emphasised that the changes were a response to sanctions against Russia.
Putin has warned that the global financial order would be undermined if the West moved to seize Russia’s frozen state reserves abroad that were blocked in response to his February 2022 invasion of Ukraine.
The new decree could also be used to sell off assets once owned by Russian investors. The Kremlin has stepped up seizures targeting Russian citizens including those with foreign passports or who’ve been accused of extremism or corruption.
Properties are often resold to new owners to raise funds for the state budget.
The total value of confiscated property since 2022 reached 3.9 trillion roubles (US$48b) as of June, according to estimates from Nektorov, Saveliev and Partners, a law firm in Moscow.
So far, Russia has refrained from nationalising assets belonging to international corporations.
Instead, it has acted to take some companies into temporary management prior to arranging sales to preferred buyers at steep discounts.
- With assistance from Alberto Nardelli, Max Ramsay and Samy Adghirni.
Sign up to Herald Premium Editor’s Picks, delivered straight to your inbox every Friday. Editor-in-Chief Murray Kirkness picks the week’s best features, interviews and investigations. Sign up for Herald Premium here.