Using Russia's frozen assets, without seizing them.
The Reparations Loan is a proposed EU mechanism to lend Ukraine money drawn from uninvested cash sitting in Russia's frozen EU accounts, up to the full value of those frozen assets. Because the EU wouldn't be seizing Russia's money, the loan could mobilize an estimated €75 billion - €210 billion for Ukraine's defense and recovery without taking ownership of Russia's money and without at no direct cost to EU taxpayers.
A loan structure, not a seizure.
The mechanism works the same way ordinary banking does. When you deposit money in a bank, it stops being "yours" in a posessory sense; legally, the bank now owns that money, and you simply hold a claim against the bank for its equivalent value. The bank is free to lend or invest those funds as it sees fit. As long as the bank stays solvent, you have no legal say in how it uses your deposit.
The Reparations Loan applies this same logic. EU depositories, like Euroclear, currently hold over €200 billion that, under this legal principle, now belongs to them outright - not to Russia. But they're sitting on this cash rather than lending it out, because they may eventually need to repay it to Russia if sanctions are lifted. Under the proposal, the EU would guarantee that money: the depositories could lend the €200+ billion to the EU interest-free, backed by a 100% EU guarantee to repay in full if the depositories ever need the funds back. This means the Reparations Loan never touches Russia's money and never puts its eventual repayment at risk.
The EU would then lend the money to Ukraine, also interest-free, for defense and reconstruction. If Russia ever pays reparations, Ukraine would repay the EU. If Russia does not pay, Ukraine would not have to repay the EU. In either case, the depositories are fully protected and never lose a cent.
This is not seizure. Russia retains its claim against Euroclear. The custodian simply lends, as banks do, against deposits on its books. The EU guarantees that if the custodian must pay Russia, it will have the money available to do so.
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 proposed 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. This also mirrors the €90 billion loan the EU already extended to Ukraine when the reparations loan proposal was put on hold.
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
Euroclear lends the EU an amount equal to what it owes Russia, and in exchange the EU guarantees to repay that amount on demand, so Euroclear can put the cash to work now while still being able to pay Russia if sanctions are lifted.
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.