POLITICO: EU rift over frozen Russian assets threatens Ukraine’s financial lifeline

Belgium’s refusal to endorse a multibillion-euro European Union loan for Ukraine could jeopardize Kyiv’s access to crucial International Monetary Fund (IMF) financing, triggering a broader loss of confidence in the war-torn nation’s economic future, EU officials have cautioned.

European backers of the proposed €140 billion “reparations loan,” which would be funded by Russian state assets frozen within the EU, argue that continued IMF support is vital for Ukraine’s financial survival. They warn that time is running out to secure new IMF loans as the country faces a deepening fiscal crisis, POLITICO reports.

Ukraine is battling a massive budget shortfall and urgently needs IMF assistance to sustain its defense against Russia’s full-scale invasion. The Fund is currently considering a $8 billion loan program over the next three years, but approval hinges on whether the EU can finalize its own €140 billion loan backed by Russian assets — most of which are held in Belgium.

According to one European Commission official and diplomats from three member states, an agreement on the EU loan would demonstrate to the IMF that Ukraine remains financially viable in the medium term — a prerequisite for any IMF-backed program.

However, Belgium’s opposition to the plan at last month’s EU leaders’ summit, citing financial and legal concerns, has dampened hopes of striking a deal before the IMF’s expected December meeting. “We are facing a timeline issue,” said one EU official, granted anonymity to speak freely. They noted that the next European Council gathering is scheduled only for December 18–19, underscoring the need for urgent action.

With Washington scaling back its financial support, EU leaders acknowledge that the bloc must shoulder a larger share of Ukraine’s funding needs. Although the IMF’s program is relatively modest in size, its approval serves as a benchmark for investors and international institutions. “It’s a benchmark for other countries and institutions to evaluate whether Ukraine is doing proper governance,” said a Ukrainian official.

During the last EU summit, leaders removed references to the €140 billion loan from official conclusions as a concession to Belgium. The diluted text merely “invites the Commission to present, as soon as possible, options for financial support based on an assessment of Ukraine’s financing needs,” falling short of concrete commitments.

To reassure the IMF, Brussels is emphasizing that Kyiv will not be required to repay the loan. “There is no universe in which Ukraine needs to come up with the money itself,” said another EU official. “It either gets the money from Russia or doesn’t give it back. As far as Ukraine is concerned, it’s as good as a grant.”

By Vafa Guliyeva