FT: Frozen Russian assets debate could cost EU countries billions each year

The European Commission has warned that EU countries could face annual interest payments of up to €5.6 billion indefinitely if they fail to reach an agreement on a €140 billion loan package for Ukraine backed by frozen Russian assets.

According to a Commission document seen by the Financial Times, this warning follows the bloc’s failure at last month’s summit to approve a widely discussed plan to support Kyiv’s finances over the next two years by using Russian sovereign assets.

The proposal was blocked by Belgium, where Euroclear — the securities depository holding the immobilised assets — is located. Belgian authorities have demanded strong guarantees to ensure the country would not face legal or financial repercussions if Russia retaliates.

The Commission document, circulated to EU capitals, emphasises the financial consequences of funding Ukraine without relying on the frozen assets. It notes that if the plan remains off the table, EU member states must either authorise joint borrowing — which would add billions in new liabilities to already strained national budgets — or provide Ukraine with direct grants totalling €140 billion.

The paper cautions that both options would “potentially require fiscal adjustments in some member states” and “would directly affect their deficit and debt.” Servicing a jointly borrowed €140 billion loan could cost as much as €5.6 billion annually, with France, already heavily indebted, paying nearly €1 billion. Italy would contribute €675 million, and Belgium, which is struggling to pass a national budget for next year, would face nearly €200 million a year in interest payments.

The document further warns that borrowing such a sum could produce “potential knock-on effects both for market absorption and, notably, the rate that the Union will generally pay on its borrowing,” and may also generate additional indirect costs for other EU finance programs.

By contrast, the Commission highlighted that the plan blocked by Belgium last month would have only entailed a temporary “contingent liability” for member states to underwrite the loan, before the funds were transferred to the EU’s shared budget in 2028.

The options paper, being discussed ahead of a December summit, which officials describe as the final deadline to agree on a financial plan to support Ukraine, also proposes solutions to some of Belgium’s concerns. Financial guarantees initially provided by member capitals, and later by the EU budget, would “cover the residual risk of a successful enforcement of an arbitral award against a member state,” the paper stated.

Additionally, the document emphasises that a “central condition” for using the Russian assets is “their continued immobilisation,” and highlights the need to establish a legal structure to keep the assets frozen beyond the current six-month renewal periods under EU sanctions law. Belgium fears that if any EU country vetoes a decision to extend the sanctions, Russia could reclaim the frozen funds and force EU capitals to repay the full loan amount.

By Tamilla Hasanova