EU hunts alternatives to finance Ukraine loan

The European Commission is exploring alternative sources of liquidity to provide Ukraine with a “reparations loan”, following the European Central Bank’s (ECB) refusal to directly finance the initiative.

The measure is intended to prepare for a scenario in which Russia’s frozen assets might need to be returned to the Central Bank of Russia, Caliber.Az reports, citing Ukrainian media.

European Commission spokesperson Paula Pinho said that discussions with the ECB are ongoing to determine feasible solutions and how best to structure the loan.

Pinho noted that ensuring the necessary liquidity for possible obligations to return assets, in particular to the Russian Central Bank, is a key element for the implementation of the "reparation loan."

"Given the ECB's position, we are discussing how to ensure this liquidity. So we are essentially looking for alternative solutions, and this is part of all the work that is happening right now on the 'reparation loan'," said a spokeswoman for the European Commission.

She stressed that the issue of ensuring liquidity is absolutely crucial, as it allows the EU, its member states, and private entities to fulfill their international obligations in any situation.

We would like to remind you that the European Central Bank refused to support the payment of €140 billion to Ukraine against Russian assets blocked in the Belgian depository Euroclear.

Earlier, European Commission President Ursula von der Leyen proposed using frozen Russian assets as collateral for providing Ukraine with "reparation loans". Formally, Russian assets subject to sanctions will not be confiscated, but Ukraine will repay such loans only after Russia pays reparations.

According to various estimates, the European Union's "reparations loan" to Ukraine, secured by Russian assets, could amount to €130-140 billion. Its final size will be determined after the International Monetary Fund assesses Ukraine's financing needs in 2026 and 2027.

In total, Euroclear currently holds more than €175 billion in cash from frozen Russian assets, which could be used to secure a new loan. But before the EU agrees to grant a reparations loan, it will want to repay the G7 loan to Ukraine of €45 billion ($50 billion) agreed last year, which was to be repaid from the proceeds of frozen Russian assets. 

By Vafa Guliyeva