The full amount of immobilised Russian sovereign assets can be offered to Ukraine without outright confiscation. EU finance ministers discussed this issue on October 10, emphasizing that not finding new financing for Ukraine is not an option. EU countries are working on a European Commission plan for a loan to Ukraine based on Russian assets. This plan involves using the cash balances associated with Russian assets to provide Ukraine with a reparations loan, without touching the assets themselves. The risk would be collectively carried, and Ukraine would only repay the loan once Russia pays for the reparations.
When Russia invaded Ukraine in February 2022, its central bank held securities at Euroclear Bank, the leading international central securities depository based in Brussels. These securities were quickly immobilised by sanctions and have mostly come to maturity since then. Consequently, the Bank of Russia has accumulated deposits at Euroclear Bank, denominated in over ten currencies and estimated at around €180 billion. This cash cannot be moved, and the Bank of Russia is not entitled to interest on it, given Euroclear Bank’s contractual terms.
For two years after the invasion, Euroclear earned interest income on the trapped Russian cash, with one quarter going to the Belgian state as corporate income tax. Since early 2024, the EU has confiscated nearly all Euroclear’s associated after-tax income. In December 2024, this stream became the basis of the Extraordinary Revenue Acceleration (ERA) loans to Ukraine, totalling $50 billion, raised by the EU with the United States, United Kingdom, Japan, and Canada. If the Commission’s reparations loan mechanism is implemented, the EU is expected to repay all ERA lenders, including itself.
Reparations Loan Mechanism
The reparations loan would involve Euroclear lending an equivalent amount to the immobilised assets, say €180 billion (in the same currencies), to a European entity. This could be the EU itself or an ad-hoc special-purpose vehicle. The zero-interest loan would not cost Euroclear since it no longer gains interest income on the cash. Europe would reimburse the ERA loans and lend the rest—about €135 billion—to Ukraine.
If Russia eventually pays reparations, Europe will use these to reimburse Euroclear. Because this is uncertain, Euroclear’s loan would be backed by guarantees from participating member states, ideally all EU countries. This would represent a significant, albeit contingent, new commitment but is worth the effort. If Ukraine loses the war, the subsequent financial costs—and other tragic consequences—are likely to be far greater for Europe.
State Guarantees and Approval
State guarantees for the loan would probably require approval from national parliaments. Euroclear would also need assurance that the block on Russia’s cash will remain for the duration of its loan to Europe, because otherwise, it would be at risk of having to borrow the difference at a loss. EU leaders have already said that Russian assets should stay immobilised until reparations are paid, but putting this reassurance into law would allow the EU to escape the need to renew the immobilisation every six months—a process that requires unanimity.
EU Leaders and Summit
EU leaders will further discuss the reparations loan at a summit on October 23-24. In this understanding, Euroclear will be reimbursed even if future diplomacy results in a settlement in which Russia does not pay reparations. However, the loan mechanism would be a powerful incentive to European countries to insist that Russia must pay reparations and to use their leverage accordingly. This may explain why the reparations loan idea has been met with furious pushback from Russian propagandists.
International Monetary Order
Meanwhile, by guaranteeing the integrity of international reserves held in Europe and of Euroclear as a securities depository, the scheme would avoid undermining the international monetary order. It achieves the best possible balance between the many parameters that have shaped the debate on Russia’s immobilised reserves.
Support for the Reparations Loan
If this scheme fails, there will be alternatives for EU provision of support to Ukraine, but they will be less effective. All Europeans should thus support a well-designed reparations loan.
