EU Plans Reparations Loan to Ukraine Using Frozen Russian Assets

The European Union is considering a reparations loan to Ukraine, backed by frozen Russian assets held mainly in G7 countries, to support Kyiv's finances amid declining U.S. military aid. The loan would use cash balances linked to Russian central bank assets without seizing them, a compromise to address opposition from some EU members like Hungary, which has vetoed sanctions due to its ties with Moscow. Ukraine would only repay the loan after receiving reparations from Russia for war damages, with risks shared among participating EU member states or a coalition of the willing excluding dissenters like Hungary. The European Commission plans to issue zero-coupon bonds backed by EU guarantees to replace the frozen assets, creating a mechanism to secure funding while navigating political challenges. European Commissioner Valdis Dombrovskis emphasized that the International Monetary Fund's assessment of Ukraine's financial needs over the next two years will guide the loan's size and timing. This initiative aims to strengthen Ukraine's financial position while managing the political complexities within the EU and the broader G7 group.