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European leaders, including those from the UK, are becoming more confident that a proposal to lend the Ukrainian government with a €140bn loan backed by immobilized Moscow's state assets can be agreed upon by the close of 2025, a step considered critical for Ukraine to maintain its defense efforts.

G7 Discussions and EU Summit

Proposals from the European Commission were discussed at a meeting of G7 finance ministers in Washington last week and will be debated at an European Union heads of state meeting on Thursday in Brussels. American participation remains unclear.

Radosław Sikorski stated last week he believed “the issue of the use, on behalf of the victim of invasion, of the immobilized Russian assets is moving toward a happy outcome.”

He added that an agreement was achievable by the end of the year: “It’s straightforward, either we use the aggressor's funds or we will have to use our own resources. It's obvious which I favor.”

Loan Structure and Juridical Basis

Under the proposal – detailed in a two-page document by the European Commission last recently – the European Union would grant a €140 billion interest-free financial assistance to Ukraine secured by the Russian frozen assets stored at the Brussels-based financial institution.

The financial package would be made on the basis that Russia would use the immobilized assets to cover conflict damages when the conflict concludes. “What we are proposing is not confiscation,” a senior EU official informed reporters earlier this period.

Kyiv's Economic Requirements and Support

The country has run an yearly financial shortfall as it has been fighting off the Russian invasion. In the previous years, it has depended on partner nations to support it with additional loans. But increasing expenses and unreliable US backing are heightening the financial commitment on Kyiv's EU partners.

In September, the Ukrainian government estimated it would need $50 billion in external support for the coming year. Specifically, European Union representatives believe Ukraine will need an immediate infusion of funds for its military operations from April 2026, amid no sign of advancement in peace talks.

Brussels' Role and Concerns

The nation holds €183bn of immobilized funds at Belgian Euroclear, and has requested detailed guarantees that it will not be solely responsible with the bill, if the scheme fails, triggering a flood of legal claims. It also desires more influence on the Group of Seven to adopt comparable measures to aid Kyiv.

International Cooperation and Assurances

Part of the scheme is that G7 countries would collaborate to guarantee the debts, principally to reassure the host nation, where the majority of the Moscow's state money, immobilized at the beginning of the full scale conflict, are held.

The United Kingdom is expected to provide support to this element of the scheme even though possessing limited immobilized Russian assets itself. Negotiations are understood to be continuing over the participations of every Group of Seven nation to these assurances – including if the US will play a part.

US involvement is less certain, but the United States also only holds a modest amount of Moscow's financial holdings, at approximately $7bn. Though White House backing will be seen in political terms and in legal terms significant, it is not necessarily financially critical.

Legal and Political Challenges

The proposal relies on the assets remaining securely immobilized. The EU executive is pitching to use a little-known mechanism in the European Union agreement to stop a single nation, such as Russia-friendly Hungary, blocking the renewal of European Union restrictions that underpin the freezing of the holdings.

But legal experts at the EU member state body, which represents participating countries, are skeptical about the legality of the move, which would change sanctions to a majority vote, instead of a consensus-based one.