The fourth anniversary of Russia's invasion of Ukraine is approaching, and the European Union has yet to make one of the most powerful decisions that could truly change the situation in Ukraine: using frozen Russian assets to help Ukraine fight the Russian military. This step would help secure the future of Ukraine - and Europe too.
French President Emmanuel Macron confirmed last week that EU countries will soon finalize a solution for financial support for Ukraine. As Russia continues to bomb Ukrainian civilian infrastructure (residential buildings, electricity generation and distribution systems, heating and water supply systems), the need for financial assistance is enormous. Even if the war ends in 2026 (and excluding the huge reconstruction costs, which will significantly exceed $500 billion), Ukraine will need approximately $140 billion over the next two years, in addition to other financing, due to the effects of the war on its economy.
Ukraine continues to resist valiantly: fighting a much larger invader, it has achieved a near-stalemate. Russian casualties (killed and wounded) exceed one million. But the loss of all these lives has brought Russia relatively little: devastated territories and populations; areas devastated by some of the fiercest fighting since World War II, now covered in mines. Russia has achieved none of the original strategic goals for which it started the war.
In February 2022, shortly after the start of the full-scale Russian invasion, $300 billion worth of Russian central bank assets (mostly interest-bearing securities) were frozen in Western financial institutions. In October 2024, the G7 countries approved the Emergency Revenue Acceleration (ERA) program to provide Ukraine with loans, financed by interest earned on these frozen Russian assets. Under the ERA program, about €30,9 billion of the planned €45 billion loan package has been disbursed so far.
But what about the underlying assets immobilized in European jurisdictions? Many of the securities have already been redeemed. Euroclear (the Belgian financial institution that holds the lion's share of Russian assets) deposits this money in an account at the European Central Bank (ECB) at very low interest rates.
At a recent EU Council meeting, the use of these assets was discussed to provide Ukraine with a “reparations loan” of €210 billion, which could only be repaid if Russia compensated Ukraine for the damage it had caused. In practice, the only difference would be that Euroclear would invest this money in AAA-rated European Commission bonds, rather than AAA-rated ECB deposits. Russia could, in principle, regain ownership of these assets after it had repaid its debt to Ukraine, making the reparations loan temporary and reversible.
As we have written before, there is no risk that this will be perceived as a “confiscation.” None of the negative consequences predicted by critics of the freeze or the ERA program have materialized. The euro remains the second most valuable currency, behind the dollar, and European financial institutions remain a safe haven for investors around the world.
Russia has created the most serious security crisis in Europe since the end of World War II, trampling on international law and norms, while its assets enjoy the protection of European institutions. In any just world, you cannot have it both ways. You cannot attack Europe by jamming GPS signals, setting fires and sabotage, waging cyberwarfare and disinformation campaigns (all orchestrated by Russian military intelligence), and at the same time receive the protection of European financial and legal institutions.
If ever there was a time to put pressure on Russia, it's now. With oil and gas revenues plummeting, Russia is finding it increasingly difficult to finance its war. Meanwhile, defense spending is rising, and high inflation is seriously hurting Russian consumers.
Due to secondary US sanctions, India's largest business conglomerate has suspended imports of Russian oil. China's four largest state-owned oil companies have also signaled that they will refrain from buying Russian oil in the near future. China and India together account for approximately 85% of Russian oil sales, and the loss of these markets would be a serious blow to Russia's military economy. It is therefore not surprising that Russia is rushing to end the war on favorable terms.
To share the remaining risk of the Reparations Loan, Belgian Prime Minister Bart de Wever demanded guarantees from other EU countries that Belgium would not be liable in the event of a court ruling in favor of the Russian Federation. Now each EU country must guarantee a certain portion of the loan (based on its gross national income).
De Wever’s concerns are unfounded. Given the grave violations of the UN Charter and the scale of Russian war crimes, there is no path to successful arbitration or an award of compensation to Russia that Belgium would have to repay. The funds are frozen under EU law, and the European Council has restricted the enforcement of any potential judgments in Russia’s favor since 2014, in response to Russia’s first invasion of Ukraine, when it illegally annexed Crimea.
And even if loan guarantees from EU member states are what is needed to overcome this obstacle, they should be provided in the necessary amounts. Belgium is not in danger, and therefore there is no risk for the guarantors. In addition, European countries should terminate their bilateral investment treaties with Russia, which is something they should have done long ago. Russia has already done this effectively by taking control of the assets of so many European companies.
As many European leaders acknowledge, Europe (including the UK and Norway) must be able to defend itself. Providing reparations loans to Ukraine would be a strong step in that direction, and the Europeans can do so without American involvement.
It would be morally wrong to miss this option. Russia is to blame for the carnage it has caused in Ukraine. A reparations loan would bring some justice, even though its amount is only a fraction of the damage Russia has inflicted on Ukraine's physical infrastructure, not to mention the damage inflicted on millions of Ukrainians. It will leave an entire generation with lifelong trauma.
The reparations loan is not just a matter of justice. It is a matter of survival. Defending Ukraine means defending Europe. And Europe must overcome its fear of using force to confront the clear, present, and deadly threat posed by Moscow.
The reparations loan is not just a matter of justice. It is about survival. Defending Ukraine means defending Europe. Europe must overcome its fear of using its power if it is to resist the clear, present, and deadly threat coming from Moscow.
JE Stiglitz is an American economic expert; he is a Nobel Prize winner in economics; he is a professor at Columbia University; he was the chief economist of the World Bank (1997-2000)
A. Kosenko is an assistant professor of economics in the School of Management at Marist College
Copyright: Project Syndicate, 2025. (translation: NR)
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