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EU officials, including those from the United Kingdom, are growing increasingly optimistic that a proposal to lend the Ukrainian government with a €140 billion financial package secured by immobilized Moscow's state assets can be finalized by the end of the year, a step considered critical for Ukraine to sustain its defense efforts.

Group of Seven Talks and European Union Summit

Proposals from the EU executive were reviewed at a gathering of Group of Seven financial chiefs in the US capital last recently and will be debated at an European Union heads of state meeting on Thursday in the EU headquarters. US participation remains uncertain.

Poland's foreign minister stated last week he believed “the issue of the utilization, on behalf of the victim of invasion, of the frozen Russian assets is heading towards a happy resolution.”

He added that an agreement was attainable by the close of 2025: “It’s very simple, either we utilize the aggressor's funds or we will have to use our own resources. Don’t ask me which I favor.”

Financial Package Structure and Juridical Basis

Under the proposal – outlined in a brief document by the European Commission last month – the European Union would provide a €140 billion interest-free loan to Ukraine based on the Russian immobilized holdings held at the Euroclear agency.

The loan would be issued on the basis that Russia would use the immobilized assets to cover war reparations when the war concludes. “What we are suggesting is not confiscation,” a senior European Union representative informed reporters earlier this month.

Kyiv's Economic Needs and Assistance

Ukraine has run an annual financial shortfall as it has been resisting the Russian invasion. In the previous years, it has depended on partner nations to support it with extra borrowing. But increasing costs and uncertain American backing are increasing the economic burden on Ukraine's European allies.

In September, the Ukrainian government estimated it would require $50bn in external support for the coming year. Specifically, EU officials think Ukraine will require an immediate infusion of funds for its military operations from spring next year, amid no sign of progress in peace talks.

Brussels' Involvement and Concerns

Belgium holds €183 billion of frozen funds at Belgian the financial institution, and has called for specific assurances that it will not be left alone with the cost, if the plan collapses, causing a flood of legal claims. It also desires more pressure on the Group of Seven to take similar steps to support Ukraine.

International Cooperation and Guarantees

An element of the proposal is that G7 countries would collaborate to guarantee the loans, principally to comfort Belgium, where most of the Moscow's state assets, frozen at the start of the large-scale war, are held.

The UK is expected to make a contribution to this element of the plan even though possessing limited immobilized Russian assets itself. Negotiations are understood to be continuing over the participations of each G7 country to these assurances – together with whether the US will play a part.

American involvement is more doubtful, but the United States also only holds a modest quantity of Moscow's financial assets, at approximately $7 billion. Although US administration backing will be seen politically and legally important, it is not necessarily economically essential.

Juridical and Diplomatic Hurdles

The proposal depends on the funds staying frozen solid. The commission is proposing to use a rarely used mechanism in the European Union agreement to prevent one country, such as Moscow-aligned Budapest, blocking the renewal of European Union restrictions that underpin the immobilization of the assets.

But lawyers at the Council of Ministers, which represents participating countries, are dubious about the lawfulness of the step, which would shift restrictions to a qualified majority decision, instead of a unanimous one.