European Union leaders are weighing the controversial prospect of utilizing roughly $300 billion in frozen Russian assets to aid Ukraine’s defense and long-term reconstruction, a debate gaining urgency as the conflict nears its fourth anniversary. While initial financial support has come through the G7-backed ERA program, discussions are now focused on a potential €210 billion “reparations loan” – a move that could significantly reshape the economic and political landscape of the war. This analysis, by Nobel laureate Joseph Stiglitz and Andrew Kosenko, examines the complexities of leveraging these funds and the potential implications for European security and financial stability.
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As the fourth anniversary of Russia’s invasion of Ukraine approaches, the European Union continues to debate utilizing frozen Russian assets to directly aid Ukraine’s defense – a move that could significantly impact the trajectory of the conflict and the future of European security. The potential use of these funds highlights the growing pressure on the EU to find innovative ways to support Kyiv.
On November 25, French President Emmanuel Macron confirmed that EU member states are finalizing a financial support solution for Ukraine. This comes as Russia continues to target Ukraine’s critical infrastructure, including homes, energy systems, and water supplies, creating an urgent need for financial assistance. Even if the war concludes in 2026, Ukraine will require approximately $140 billion over the next two years to address the economic fallout, separate from the massive, estimated $500 billion cost of reconstruction.
Despite facing a significantly larger adversary, Ukraine continues to mount a staunch defense, effectively reaching a stalemate on the front lines. Russian casualties – including those killed and wounded – have surpassed one million. However, despite this immense loss of life, Russia has gained relatively little – acquiring devastated territory and leaving a population scarred by conflict in land heavily mined since World War II. Russia has failed to achieve its original strategic objectives when launching the invasion.
Shortly after Russia’s full-scale invasion in February 2022,
Western financial institutions froze approximately $300 billion in Russian central bank assets, primarily consisting of interest-bearing securities.
In October 2024, the G7 nations established a program to increase revenues (ERA) that provided loans to Ukraine financed by the interest earned on these frozen Russian assets. Under the ERA program, roughly €30.9 billion ($35.7 billion) of a planned €45 billion credit line has been disbursed to date.
But what about the assets held under European jurisdiction? Many have been converted to cash, held by Euroclear – the Belgian financial institution holding the majority of the assets – in an account at the European Central Bank earning very little interest.
During a recent EU Council meeting, discussions centered on using these assets to provide Ukraine with a “reparations loan” worth €210 billion, to be repaid only if Russia compensates Ukraine for the destruction it has caused. Essentially, Euroclear would reinvest the cash into AAA-rated European Commission bonds instead of AAA-rated ECB deposits. Russia could, in theory, reclaim ownership of these assets after providing reparations to Ukraine, making the reparations loan temporary and reversible.
As previously argued, there is no risk of this being interpreted as “confiscation.” None of the adverse effects predicted by critics of freezing Russian assets and the ERA program have materialized. The euro remains the second most important currency after the dollar, and European financial institutions continue to be seen as a safe haven for investors worldwide.
While Russia has triggered the most severe security crisis in Europe since World War II, violating international law and norms, its assets continue to enjoy the protection of European institutions. But in a just world, these two realities cannot coexist. It is untenable to simultaneously target Europe with GPS jamming, arson attacks, sabotage, cyber warfare, and disinformation campaigns orchestrated by Russian military intelligence, while simultaneously benefiting from the protection of European financial and legal institutions.
If there was ever a time to increase pressure on Russia, that time is now. As oil and gas revenues plummet, Russia is finding it increasingly difficult to finance its attritional war. Its defense spending is rising, and high inflation is severely impacting the Russian population.
Following secondary sanctions from the U.S., India’s largest company halted Russian oil imports. Four major Chinese state-owned oil companies have also indicated they will not purchase Russian oil in the short term. China and India together account for approximately 85% of Russian oil sales, and the loss of these markets would significantly impact Russia’s war effort. Unsurprisingly, Russia is seeking to force a resolution to the conflict on favorable terms as quickly as possible.
To share the risk of the reparations loan, Belgian Prime Minister Bart De Wever is seeking guarantees from other EU member states that Belgium will not be liable in the event of a successful claim against Russia. This would require each member state to guarantee a portion of the loan, based on their gross national income.
De Wever’s concerns are unfounded. Given the grave violations of the UN Charter and the extent of Russian war crimes, it is unlikely that a court or other proceeding would rule in favor of Russia, requiring Belgium to pay. The freezing of Russian assets occurred under EU law, and the European Council already restricted potential proceedings favorable to Moscow in 2014 in response to Russia’s first invasion of Ukraine and the illegal annexation of Crimea.
Even if credit guarantees from EU member states are needed to overcome this hurdle, they should be provided to the necessary extent. Furthermore, European countries should terminate their bilateral investment treaties with Russia – something that should have been done long ago. Russia has effectively terminated many of them by seizing control of numerous European companies.
As many European leaders recognize, Europe – including the United Kingdom and Norway – must be able to defend itself. Providing Ukraine with a reparations loan is a strong step in that direction, one that Europeans can take without American involvement.
It would be morally reprehensible not to seize this opportunity. Russia is guilty of the bloodshed it has caused in Ukraine. A reparations loan would deliver some measure of justice, although the amount would only represent a fraction of the physical damage Russia has inflicted, not to mention the trauma inflicted on millions of Ukrainians. An entire generation will carry this trauma for the rest of their lives.
The reparations loan is not just about justice; it’s about survival.
Protecting Ukraine means protecting Europe.
Europe must overcome its fear of exercising power if it is to stand up to the clear, existing, and lethal threat posed by Moscow.
Copyright: Project Syndicate, 2025.
Joseph E. Stiglitz
A Nobel laureate economist and professor at Columbia University, receiving the prize in economics in 2001. He was a lead author of the 1995 report by the Intergovernmental Panel on Climate Change (IPCC), which organization received the Peace Nobel Prize in 2007. He chaired Bill Clinton’s Council of Economic Advisers from 1995-1997 and served as the World Bank’s chief economist and senior vice president from 1997-2000. His research focuses on income inequality, climate change, corporate governance, and globalization.
Andrew Kosenko
An assistant professor of economics at Marist College in the United States.
Címlapkép forrása: Eugene Hertnier/Suspilne Ukraine/JSC “UA:PBC”/Global Images Ukraine via Getty Images
