Using Russia's frozen assets— without seizing them.
The Reparations Loan is a proposed EU mechanism that would borrow against the principal of frozen Russian assets, not just the interest they generate. It is a cost-free way to mobilise up to €140 billion for Ukraine's defence and recovery without taking ownership of Russia's money.
A loan structure, not a seizure.
The mechanism is structurally identical to how banks operate. When money is deposited, it ceases to belong to the depositor in a possessory sense — the depositor holds a claim on the bank, and the bank uses deposits to make loans and investments.
As long as the bank remains solvent, the depositor has no legal right to direct how funds are deployed. The Reparations Loan applies the same logic:
Russia's assets are not seized or transferred. They remain in Euroclear, and Russia retains its claim. If sanctions are lifted, Russia would be repaid in full.
This is not seizure. Russia retains its claim against Euroclear. The custodian simply lends, as banks do, against deposits on its books.
What are the main risks?
The central risk is that sanctions are lifted before Ukraine repays the loan, requiring the lending government to repay Euroclear directly. This risk is substantially mitigated by the following factors.
- 01Low
Voluntary sanctions removal.
Governments control their own sanctions. The G7 has stated sanctions remain until Russia pays reparations. If Russia pays, those reparations would repay the loan.
- 02Low
Forced settlement waiving reparations.
A settlement forgoing reparations would also unfreeze the assets — leaving the EU to bear reconstruction costs regardless. The Reparations Loan does not create this risk; it already exists.
- 03V. Low
Sanctions legally overturned.
Virtually no plausible legal mechanism exists to force sanctions removal. Independent legal analysis finds this risk negligible.
Shelved in December 2025, but not withdrawn.
Legislative status
The Commission's package has not been withdrawn — only deferred.
The European Commission prepared a complete legislative package for the Reparations Loan. It failed to obtain the qualified majority required at the December 2025 European Council but has not been withdrawn. EU leaders tasked the Commission with continuing work on the proposal's technical and legal aspects.
3 Dec 2025 Commission publishes Reparations Loan proposal.
18 Dec 2025 EUCO shelves proposal; agrees instead to a €90B market-based loan.
The legislation explicitly reserves the EU's right to use frozen Russian state assets to repay the loans in accordance with international law — preserving the pathway to a future transfer if Russia does not pay reparations.
The United Kingdom was prepared to deploy its own Reparations Loan of approximately £8 billion, contingent on the EU proceeding first.
The Reparations Loan is not reparations.
Despite its name, the Reparations Loan does not make Russia pay. It is a transaction between Euroclear and the EU. Russia's balance at Euroclear remains intact, no assets are seized, and no legal responsibility is imposed on the aggressor. The mechanism fundamentally avoids making Russia pay.
Reparations Loan
Reparations
A loan from Euroclear to the EU, secured by frozen balances.
Payment by Russia to compensate Ukraine for damages caused by its aggression.
Russia’s account balance is unchanged.
Russia’s assets are transferred to satisfy its legal obligation.
No legal responsibility is assigned to the aggressor.
Enforces Russia’s obligation under international law (ARSIWA Art. 31).
A financing mechanism.
An act of accountability.