EXPLAINER: EU plan to use frozen Russian assets to fund Ukraine - what’s at stake?

European Union leaders will decide whether to use frozen Russian assets to lend almost a trillion dollars of cash to Ukraine to keep its military effort afloat at a summit on Thursday seen as a critical test of the group's strength.

The EU regards Russia's military campaign as a threat to its own security and wants to keep Ukraine financed and fighting.

But agreement is far from certain. 

So, how likely is that agreement will be reached? What are the arguments for and against the plan? And what happens if it fails?

What does the plan involve?

The European Commission has proposed using frozen Russian central bank assets that are mostly held in Belgian clearing house Euroclear to secure a huge loan to Kyiv. 

The EU has frozen €210 bn ($247bn) of Russian central bank assets which are mostly held at Euroclear in Brussels. As the fourth anniversary of the conflict’s beginning approaches, the EU wants to use this money to generate the loan.

The plan would see the EU borrow from Euroclear to provide Ukraine with a loan of €90 bn ($105 bn), which equates to around two-thirds of Kyiv’s funding requirements for 2026 and 2027. 

Ukraine would repay the money to the EU if and when Russia agreed to pay reparations for damage inflicted during the conflict. The EU would then pass the money onto Euroclear. 

Until now the EU has only given Ukraine access to the cash interest generated by the funds.

What are the so-called ‘frozen’ assets and where are they held?

Russia has sovereign assets in the EU in the form of cash, bonds and securities. They were frozen by the bloc within days of Russia’s ‘special military operation’ beginning in February 2022. 

The private assets of sanctioned Russian billionaires were also frozen, including yachts and real estate, under a batch of sanctions.

There is a total of around €300 billion ($352 bn) in frozen Russian assets globally, of which €210 billion ($246 bn) is held under EU Member States' jurisdictions, with €180 billion ($211 bn) of that held at Euroclear. The remaining assets are held in the US, Japan, UK, Switzerland and Canada. 

What has Russia’s response been to the threat?

Russia's central bank has said the EU plans to use its assets are illegal and it reserves the right to use all available means to protect its interests. 

It filed a lawsuit in Moscow this week seeking $230 billion in damages from Euroclear. The first hearing is scheduled for mid-January.

Russian officials are also believed to be considering seizing any remaining western assets in their country. 

According to the Kyiv School of Economics Institute, in 2024 Western companies held at least $127 bn of assets in Russia.

Where do the 27 countries stand on the plan?

Publicly For: Germany, Denmark, Sweden, Finland, Poland, Estonia, Latvia, Lithuania, Ireland, Netherlands, Spain, Portugal, Romania

Publicly Against: Hungary, Bulgaria, Malta, Slovakia

Leaning Towards: Cyprus, Greece

Sceptical: Belgium, Italy, Croatia

Undeclared/Unknown: France, Austria, Czechia, Luxembourg, Slovenia

What do EU leaders say?

European leaders will not leave this week's EU summit without a final decision to ensure the financial needs of Ukraine for 2026-2027, Antonio Costa, head of the European Council, said on Thursday.

"We will never leave the council without a final decision to ensure the financial needs of Ukraine," Costa told reporters on Thursday.

European Commission chief Ursula von der Leyen said she would not leave the summit without agreement on how to finance Ukraine over the next two years.

Does the plan require unanimity?

It requires a majority of at least 15 member states making up 65 percent of Europe's population to go through. However, European Council President António Costa has promised that the wishes of Belgium, the country which feels most exposed to the plan’s risks, will be paramount.

What happens if the plan fails?

Belgium backs an idea for the EU to borrow the money on the international markets, using the EU budget as a guarantee. But that would require a unanimous vote, which is seen as impossible to get through.

If the EU fails to get its plan through, the EU’s reputation will be threadbare and Russian President Vladimir Putin will feel emboldened to toughen his negotiating stance in ongoing peace talks.