Europe faces a financial decision of rare consequence. Ukraine’s war effort, sustained for two and a half years by foreign aid, is approaching a fiscal cliff: a budget shortfall of more than €100 billion looms across 2026 and 2027. If left unresolved, it would cripple the state, unravel its defences, and hand Russia the upper hand. The question is simple but stark: where will the money come from?
One answer lies dormant in European vaults. Since 2022, around €200 billion of Russian central bank reserves have been frozen, trapped in the pipes of Europe’s financial system. Now European leaders are debating whether to transform those reserves into Ukraine’s lifeline: a loan backed by the assets themselves, to be repaid only if Russia one day fulfils its obligation to pay reparations. A healthy pinch of financial ingenuity underpins the scheme, but that does not make it any less bold. It is unprecedented, legally fraught, and politically divisive. Yet it is also one of the few ideas that matches the scale of Ukraine’s looming crisis.
Opponents warn of a dangerous precedent. If Russian assets can be seized, what is to stop the EU from targeting others? Law-hugging eurocrats fret about the sanctity of international rules, which protect state property, while investors are said to whisper about the stability of Europe’s financial system. Some warn that the very credibility of the eurozone as a safe haven could be at risk. Sceptics ask whether Europe should endanger its reputation for the sake of what they see as a legal experiment.
But this framing conceals more than it reveals. These are not private investments, nor the savings of an ordinary state: they are the reserves of a government that has launched a war of conquest in violation of the UN Charter. That such a regime, having so brazenly broken so many of the gravest international laws, can still invoke legality to shield its wealth is pitiful and absurd. To equate Russia’s frozen billions with the deposits of Thailand or Brazil is to misunderstand the very nature of the crisis. The bar has been set so incredibly high by Russia’s invasion that it will be nigh impossible for another country to surpass it and have its money repurposed. The real danger is not that Europe might act too boldly, but that it might fail to act decisively in the face of such aggression.
Fears about investor appetite, meanwhile, are misplaced. The plan is so clearly tied to Russia’s unique circumstances: an imperialist war, years of atrocities, and a regime already sanctioned into isolation that no foreign company would see it as relevant to their own deposits. Investors will not shun Europe because Russia’s central bank reserves were used to fund a loan to Ukraine. By contrast, a total Ukrainian collapse would have real and immediate effects: it would destabilise Europe’s fragile economies, drive up defence spending, and erode confidence in the continent’s future. That is the reputational risk that matters.
Here, the debate sharpens into what it truly is: a confrontation between two competing visions of sovereignty. One vision clings narrowly to procedure, as though law were an end in itself. The other insists that law must serve survival, that sovereignty cannot be defended on paper alone. Even then, Europe’s task is not to abandon legality but to interpret it with the urgency this war demands.
Much also depends on international backing. Acting in concert with the United States and G7 partners would mute the reputational risks, lending the policy the air of collective legitimacy rather than unilateral adventurism. In this sense, Donald Trump’s unexpected support for the plan may prove decisive. If Europe and Washington align, it becomes far harder for sceptical capitals, notably Budapest or Bratislava, to resist.
And yet, despite the urgency, the path is still long. Even optimistic officials admit that turning the idea into reality will take time, and may not arrive before Ukraine’s fiscal hole begins to bite. The danger is therefore political drift. Europe is hesitant to act decisively while Ukraine edges toward collapse. Germany’s recent support has given the proposal fresh momentum, proof that even one of the continent’s most cautious powers recognises the urgency of the moment.
Handled well, with transparent structures and strong legal foundations, the risks of the proposal are manageable. The risks of inaction are not: the erosion of Ukraine’s statehood, the emboldening of Russian revanchism, and the destabilisation of Europe’s democracies. Europe must recognise that the choice is not between risk and safety, but between two kinds of risk, one minor, the other existential.
“On Day of Defenders of Ukraine President presents orders of Gold Star, Cross of Combat Merit awards, awards military units with honorary titles.” by President Of Ukraine is marked with CC0 1.0.
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Should Europe use Russia’s frozen assets to save Ukraine?
Europe faces a financial decision of rare consequence. Ukraine’s war effort, sustained for two and a half years by foreign aid, is approaching a fiscal cliff: a budget shortfall of more than €100 billion looms across 2026 and 2027. If left unresolved, it would cripple the state, unravel its defences, and hand Russia the upper hand. The question is simple but stark: where will the money come from?
One answer lies dormant in European vaults. Since 2022, around €200 billion of Russian central bank reserves have been frozen, trapped in the pipes of Europe’s financial system. Now European leaders are debating whether to transform those reserves into Ukraine’s lifeline: a loan backed by the assets themselves, to be repaid only if Russia one day fulfils its obligation to pay reparations. A healthy pinch of financial ingenuity underpins the scheme, but that does not make it any less bold. It is unprecedented, legally fraught, and politically divisive. Yet it is also one of the few ideas that matches the scale of Ukraine’s looming crisis.
Opponents warn of a dangerous precedent. If Russian assets can be seized, what is to stop the EU from targeting others? Law-hugging eurocrats fret about the sanctity of international rules, which protect state property, while investors are said to whisper about the stability of Europe’s financial system. Some warn that the very credibility of the eurozone as a safe haven could be at risk. Sceptics ask whether Europe should endanger its reputation for the sake of what they see as a legal experiment.
But this framing conceals more than it reveals. These are not private investments, nor the savings of an ordinary state: they are the reserves of a government that has launched a war of conquest in violation of the UN Charter. That such a regime, having so brazenly broken so many of the gravest international laws, can still invoke legality to shield its wealth is pitiful and absurd. To equate Russia’s frozen billions with the deposits of Thailand or Brazil is to misunderstand the very nature of the crisis. The bar has been set so incredibly high by Russia’s invasion that it will be nigh impossible for another country to surpass it and have its money repurposed. The real danger is not that Europe might act too boldly, but that it might fail to act decisively in the face of such aggression.
Fears about investor appetite, meanwhile, are misplaced. The plan is so clearly tied to Russia’s unique circumstances: an imperialist war, years of atrocities, and a regime already sanctioned into isolation that no foreign company would see it as relevant to their own deposits. Investors will not shun Europe because Russia’s central bank reserves were used to fund a loan to Ukraine. By contrast, a total Ukrainian collapse would have real and immediate effects: it would destabilise Europe’s fragile economies, drive up defence spending, and erode confidence in the continent’s future. That is the reputational risk that matters.
Here, the debate sharpens into what it truly is: a confrontation between two competing visions of sovereignty. One vision clings narrowly to procedure, as though law were an end in itself. The other insists that law must serve survival, that sovereignty cannot be defended on paper alone. Even then, Europe’s task is not to abandon legality but to interpret it with the urgency this war demands.
Much also depends on international backing. Acting in concert with the United States and G7 partners would mute the reputational risks, lending the policy the air of collective legitimacy rather than unilateral adventurism. In this sense, Donald Trump’s unexpected support for the plan may prove decisive. If Europe and Washington align, it becomes far harder for sceptical capitals, notably Budapest or Bratislava, to resist.
And yet, despite the urgency, the path is still long. Even optimistic officials admit that turning the idea into reality will take time, and may not arrive before Ukraine’s fiscal hole begins to bite. The danger is therefore political drift. Europe is hesitant to act decisively while Ukraine edges toward collapse. Germany’s recent support has given the proposal fresh momentum, proof that even one of the continent’s most cautious powers recognises the urgency of the moment.
Handled well, with transparent structures and strong legal foundations, the risks of the proposal are manageable. The risks of inaction are not: the erosion of Ukraine’s statehood, the emboldening of Russian revanchism, and the destabilisation of Europe’s democracies. Europe must recognise that the choice is not between risk and safety, but between two kinds of risk, one minor, the other existential.
“On Day of Defenders of Ukraine President presents orders of Gold Star, Cross of Combat Merit awards, awards military units with honorary titles.” by President Of Ukraine is marked with CC0 1.0.
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