Europe has finally found the will and a way to tap frozen Russian assets to support Ukraine—sort of.
On Thursday, German Chancellor Friedrich Merz called for the large-scale mobilization of frozen Russian Central Bank assets to underwrite Ukraine to the tune of about 140 billion euros ($164 billion), with the money to be used solely to equip Kyiv with new weapons to ensure that it can survive on the battlefield.
It marks a major shift from the previous German government, which—alongside Belgium and France—was deeply skeptical of touching Russian assets, which have been frozen in Western countries since the first days of the war on Ukraine. Belgium and France have long been leery about the legal implications of outright confiscating the nearly 200 billion euros ($234 billion) in Russian assets currently in European Union hands, fearing both judicial liability and a broader loss in confidence in the euro.
“This signals to [Russian President Vladimir] Putin, we are going to fund Ukraine to fight on, and with European weapons at that, and that we are going to take your savings, and I think that part is a bit more questionable” if the underlying assets aren’t actually seized, said Sander Tordoir, the chief economist at the Centre for European Reform, a London-based think tank.
Merz’s call comes after European Commission President Ursula von der Leyen promised earlier this month that Europe was working out some formula that would enable it to meet Ukraine’s financing needs not on the backs of European taxpayers, but with Russian money instead.
“We must be very clear: This is Russia’s war, and the perpetrator must pay for it,” she said on Sept. 18 while introducing the bloc’s latest proposed sanctions on Russia.
The newfound European consensus on moving more aggressively comes after U.S. President Donald Trump earlier this week seemed to wash his hands of further involvement in the Ukraine war.
“The good news is the money will go to Ukraine. There is recognition that there is a big financing gap—they need money, and this is the obvious source,” said Timothy Ash, a sovereign strategist at RBC BlueBay Asset Management and a fellow at Chatham House, a U.K. think tank.
The growing consensus around more aggressive use of Russia’s frozen assets could come into focus next week at a meeting in Denmark of the bloc’s heads of state and government, where further details are expected to be ironed out. The evolving plans give Europe a way to pick up the slack for Ukraine’s support even as the United States steps back.
“They’ve been prepared for quite a while—the Europeans always knew they could pull this lever, and they have done so to a small degree already,” Tordoir said.
What’s less clear is just how many EU member states will support the new measures, and exactly how the financing would work in practice. The two issues are linked: Just a few days ago, French President Emmanuel Macron reiterated his opposition to confiscating frozen Russian assets, though he appeared to be more open to a novel financing solution after meeting with Ukrainian President Volodymyr Zelensky at the United Nations this week.
What seems increasingly apparent is that Brussels (and Berlin) are unwilling to let recalcitrant EU member states, such as pro-Russia Hungary and Slovakia, block any additional measures inside the European Union, which normally requires unanimous consent to approve major steps, such as sanctions. Merz stressed that the new financing plan could be approved with a “large majority,” rather than the entirety, of EU member states.
The plan, as it is being sketched out, seems to be a bigger version of something that Europe and Group of Seven member states have already done: tapping the interest from frozen Russian assets to underwrite modest loans to meet Ukraine’s immediate financial needs. (Russia has no legal claim to the interest accrued on matured securities.)
Proposals under discussion reportedly include moving the cash held in Europe to Ukraine in tranches and replacing it with long-term EU debt obligations, which would essentially leave the underlying assets untouched but would immediately mobilize the money for Ukraine. Repayment would be contingent on Russia making war reparations to Ukraine at the negotiated end of the war.
Another idea is for European Union member states, or the EU as a whole, to issue new debt that would ostensibly be underwritten by the frozen Russian assets.
“Russia will still own the underlying assets, but the money will be used to fund Ukraine,” Ash said. “Russia will only get the money back when reparations are made.”
One lingering difference between proposals coming out of the European Commission and the plan outlined by Merz is what the money would be used for. Merz wants it to be earmarked exclusively for defense, seemingly echoing Zelensky’s argument in the United Nations that arms alone will determine Ukraine’s survival. The commission is still working on a financing package that would cover defense needs as well as reconstruction and other Ukrainian financing needs.
The United Kingdom, Canada, and the United States together have another $50 billion or so in frozen Russian assets, and they are also on board with a more aggressive mobilization of those funds to finance Ukraine, making the total package potentially more than the 140 billion euros that Merz outlined.
This month, Moscow reiterated its opposition to any move toward confiscation of its frozen assets, warning that there would be “consequences.”
Many observers believe that the legal arguments against confiscation are exaggerated, because Russia—through its use of aggressive war—has already renounced any protections under international law that could shield sovereign assets. But even without that bolder step, serious amounts of money could be made available to backstop Ukraine.
“It’s disappointing that the assets are not being seized, but the key is that Ukraine has the financing to survive and win the war. And these numbers are big enough to make a difference,” Ash said.
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