The Hindu: Published on 12th December 2025.
Why in News?
On October 23, 2025, EU leaders pledged to financially support Ukraine for the next two years. However, the key challenge is where the money will come from, as most EU nations are already struggling with high public debt.
A crucial meeting on December 18 in Brussels is expected to finalise the funding decision.
Background:
Since Russia’s invasion of Ukraine in February 2022, the EU has spent about $230 billion to support Kyiv.
In 2024, the EU raised $54 billion by using its budget as collateral, but this increased the bloc’s collective debt.
Any new large-scale borrowing requires unanimous approval from all 27 EU states, which is unlikely since Hungary’s Viktor Orban has already refused.
Several European countries have reduced or delayed their commitments for 2026 due to economic pressures.
Key Issues:
A. Financial Constraints
Public debt across EU states is already high.
New borrowing would be economically risky and politically unpopular.
Italy has scaled back aid; Spain has made no new commitments for 2026.
B. Use of Frozen Russian Assets
Europe holds $244 billion in frozen Russian assets.
Plan: Use these assets to support a $104 billion loan to Ukraine for 2026–2027.
For this to work, Russian assets must be immobilised indefinitely, not just frozen temporarily.
C. Legal and Political Risks
Most Russian assets are held in Euroclear (Belgium).
Belgium fears:
Retaliation by Russia
Lawsuits if sanctions are lifted
Bearing disproportionate costs
Belgium demands guarantees that losses will be shared by all EU members.
D. U.S. Opposition
The Trump administration opposes Europe’s plan.
Under Trump’s proposed 28-point peace plan, frozen Russian assets would be placed into a joint fund for Ukraine’s reconstruction after a peace deal—not used now.
E. Europe’s Geopolitical Dilemma
Europe feels sidelined by the U.S. in peace negotiations.
EU leaders reaffirm support for Ukraine in recent meetings in Geneva and London.
But Ukraine’s finances are critically low, and Europe lacks funding options.
Impact:
A. Impact on Ukraine
Ukraine is running out of money and losing ground militarily.
Lack of EU funding could put Ukraine in severe peril.
B. Impact on Europe
Immobilising Russian assets could:
Increase tensions with Moscow
Deepen disagreements with the U.S.
Undermine global confidence in holding reserves in euros
Not using the assets means Europe may fail to support Ukraine adequately.
C. Impact on Global Geopolitics
Rising EU-Russia tensions could destabilise security architecture.
U.S.–EU differences may weaken Western unity on Ukraine.
Challenges (Two Major Problems)
Problem 1: Belgium’s Objection
Euroclear, in Belgium, holds most frozen Russian assets.
Belgium fears:
Legal liability
Financial retaliation
Political risk
Belgium demands burden-sharing guarantees from the EU.
Problem 2: U.S. (Trump Administration) Objection
U.S. wants assets saved for a joint post-war reconstruction fund.
U.S. believes Europe’s plan could disrupt future peace negotiations.
Europe believes the Trump plan benefits Russia.
Possible Future Scenarios:
Scenario A: Europe Uses Russian Assets
Ukraine gets immediate relief.
But:
EU–Russia tensions escalate
Strain on EU–U.S. relations
Euro may lose reliability as a global reserve currency
Scenario B: Europe Avoids Using Russian Assets
Ukraine faces severe financial crisis
Europe fails to meet its commitment
Kyiv may lose more ground militarily
Scenario C: Compromise Approach
EU may attempt:
A partial use of Russian assets
A joint mechanism involving the U.S.
New burden-sharing financial tools inside the EU
Conclusion:
