The idea of 70 billion euros: what changes the new EU initiative on frozen Russian assets

The idea is simple at first glance: not to confiscate all the capital, but to exchange it for EU bonds and transfer the funds to Ukraine.

Such an approach could be a way out for the EU and Ukraine. After all, it allows you to avoid the legal risks of direct expropriation, but at the same time sends a strong political signal: Russia is now starting to pay for the war.

 

"Confiscation" without confiscation

 

The total amount of frozen assets of the Central Bank of Russia in the EU is about 200 billion euros. They are mainly stored in the Euroclear depository in Brussels and Clearstream in Luxembourg.

Until now, the EU has only had the right to use interest income from these funds - the so-called windfall profits. Their volume has ranged between three and five billion euros per year and was mainly used to service the G7 loan for Ukraine (ERA, Extraordinary Revenue Acceleration Loans).

The model of the proposed "Reparation Loan" opens up the possibility of using not only interest, but also those cash flows that arise during the repayment of Russian bonds or the expiration of deposit terms.

Today, these funds automatically go to accounts at the European Central Bank and remain there in a passive state. The Commission proposes to exchange them for zero-coupon bonds guaranteed by all EU countries, and in this way direct the money received to Ukraine.

This means that the ownership is not changed, but the form of storage of the assets. Russia remains the nominal owner, but the real liquidity of the money goes to Kiev.

Theoretically, the mechanism’s ceiling is equal to the sum of all frozen reserves of the Russian Central Bank. In practice, access to it will be introduced gradually as the assets mature.

According to experts, over the next five years, it is possible to accumulate from 50 to 70 billion euros for Ukraine through this scheme.

Potentially, part of the funds could be obtained in advance through the issuance of bonds for future revenues. This is not an unlimited source, but the amount is commensurate with Ukraine’s annual defense spending.

It should be noted that the proposed structure does not provide for the reinvestment of frozen assets in riskier instruments. This is a fundamental difference from previous ideas.

The EU is not trying to turn frozen money into a fund for financial experiments. On the contrary, the assets remain in a safe “frozen” state.

The only thing that changes is the form of their holding: part of the cash is replaced by guaranteed EU bonds, which are the most reliable debt instrument in the European financial architecture.

This is also an important signal to international partners. The EU is not using other people's assets for its own benefit, but is creating a transparent mechanism aimed solely at future reparations for Ukraine.

This approach minimizes the risk of undermining confidence in the euro as a global reserve currency.

 

The main point is that this instrument allows closing the annual Ukrainian budget deficit at the level of eight to ten billion euros without directly putting pressure on the budgets of the member states.

In this way, solidarity with Ukraine ceases to depend on political cycles in parliaments and on populist waves. Assistance becomes more predictable and less vulnerable to internal fluctuations in Europe.

For Kiev, this is a signal that the West is not reducing the pace of support, but is looking for innovative instruments that can function even within legal constraints.

On the other hand, for Moscow, this is the opposite signal: even frozen money does not remain neutral, but is gradually turning into a resource for Ukrainian stability.

 

Challenges and the IMF factor

 

The mechanism has obvious challenges. Moscow is already preparing arguments that even the exchange of assets for bonds is expropriation.

The likelihood of litigation in international arbitrations and national courts is high. An additional test will be the issue of political unity: its launch requires unanimous support from all EU states.

It is obvious that Hungary or Slovakia could try to block or delay the process, using it as an instrument of EU domestic policy.

There is also a reputational risk to the European Union.

If other countries get the impression that the EU is ready to use other people’s reserves under any pretext, this could undermine the confidence of those countries that hold foreign exchange reserves in euros.

It is therefore vital that Brussels proves that this is not an arbitrary interference with property, but a clearly justified reparations mechanism based on international law and the principle of aggressor responsibility.

However, there is another dimension that makes this idea particularly relevant.

Behind the scenes, there is increasing discussion about the new International Monetary Fund program for Ukraine. It is said that, unlike the previous ones, it could focus less on structural reforms and much more on ensuring macro-financial stability.

In such a configuration, the Reparations Loan could become a key element: it would allow the IMF to see a stable and predictable source of external financing, without shifting the entire additional burden to the Fund’s donors and without forcing Ukraine to take on additional obligations in the midst of the war.

This mechanism could become precisely the bridge that would connect the IMF’s lending programs with Ukraine’s practical financial capacities. It would help maintain investor and donor confidence, and would also allow for spending planning not for a month in advance, but for years.

 

***

 

The reparations loan is not only a financial mechanism, but also a political experiment. It is capable of providing Ukraine with tens of billions of euros over several years, closing a critical budget deficit.

But at the same time, it will be a test of the EU's unity and Brussels' ability to make legally creative decisions without destroying its own financial reputation.

For Kiev, this step could become the most stable source of external support in the coming years. For Brussels, it will be a test of maturity and responsibility.

And for Moscow, it will be a symbol of the fact that even frozen money is being turned into a weapon against the aggressor.