EU Freezes Russian Central Bank Assets Indefinitely to Support Ukraine Loan

Historic Step

The European Union appears poised to take a historic step by indefinitely freezing around €210 billion of Russian central bank assets held within its financial system, removing a major procedural hurdle that had stalled plans to use the funds to finance Ukraine’s defence and reconstruction.

Under the current framework, these assets frozen under sanctions since the start of Russia’s full-scale invasion in 2022 must be renewed every six months by unanimous agreement among all EU member states. That requirement made the freeze vulnerable to blockades by Russia-friendly governments, particularly Hungary and Slovakia.

By shifting to an indefinite freeze approved by a qualified majority, the EU aims to prevent any single country from undermining the policy and to lock in the funds as a basis for a major financial commitment to Ukraine.

How the Freeze Helps Ukraine

The move is designed to clear the way for the EU to use these frozen assets or more specifically, their financial value and income as collateral for a planned €165 billion loan that would help Ukraine cover military and civilian expenses in 2026 and 2027. The loan is structured so that Ukraine would repay it once Russia compensates Ukraine for war damages, effectively treating it as an advance on future reparations.

Germany has signalled support for the plan, including backing up to €50 billion in guarantees to strengthen the EU’s borrowing position. The expectation is that if the indefinite freeze is adopted at the upcoming European Council summit on December 18, it would solidify political backing for the loan initiative.

Controversy and Legal Pushback

Not everyone in the EU is on board. Hungarian Prime Minister Viktor Orbán has criticised the move, calling it potentially destructive to the EU’s legal framework. He and others argue that using another country’s sovereign assets even frozen under sanctions risks long-term legal and diplomatic fallout.

Russia’s central bank has also vehemently opposed the initiative. It has labelled the EU’s actions “illegal” and filed legal complaints, including lawsuits in Russian courts against Euroclear, the Belgian financial institution that holds most of the frozen funds. Moscow has vowed to challenge the freeze in domestic and international legal venues.

Beyond political pushback, Belgium where the majority of the assets are held remains cautious due to potential legal liabilities if Russia successfully litigates against financial institutions or governments over the immobilised funds.

What Happens Next

EU ambassadors have already signalled support for the new legal mechanism to make the freeze indefinite and bypass national vetoes, paving the way for the formal decision in the coming days. If adopted at the December 18 summit, the framework would represent a major shift in how the EU can use sanctions-era assets to support Ukraine’s finances and demonstrate a stronger unified stance against Russian aggression.

Why This Matters

•  Sets a precedent for using frozen sovereign assets in support of war-affected states.
  
  

•  Limits the veto power of individual EU member states over sanctions enforcement.
  
  

•  Opens the door for longer-term, predictable funding for Ukraine’s defence and reconstruction.
  
  

•  Raises legal and diplomatic tensions between the EU and Russia, with potential knock-on effects for financial markets and EU sovereign immunity norms.

Source:

Reuters/ AP News/Investing.com