In a decisive move, European Union (EU) leaders have agreed to provide Ukraine with a substantial $105 billion interest-free loan to fund its military and economic needs over the next two years, steering clear of using frozen Russian assets. This landmark decision reflects the EU’s ongoing commitment to supporting Ukraine amid Russia’s ongoing military aggression.

EU Council President Antonio Costa confirmed the agreement, stating that the financial package, totaling 90 billion euros ($105.5 billion), will cover Ukraine’s defence and broader economic requirements for 2026 and 2027. “We have a deal,” Costa posted on social media. “Decision to provide 90 billion euros [$105.5bn] of support to Ukraine for 2026-27 approved. We committed, we delivered.”

EU Chooses Capital Market Borrowing Over Frozen Russian Assets

Diplomats revealed that the EU leaders decided early Friday to raise funds through capital markets, rather than tapping into the billions of euros of Russian assets frozen across EU banks. This move comes after extensive negotiations aimed at balancing legal, political, and financial considerations.

A draft of the summit conclusions, obtained by Reuters, indicated that the loan will be secured against the EU budget. While discussions on using frozen Russian central bank assets are set to continue, the EU opted for a safer, politically uncontroversial route to ensure Ukraine receives timely support.

Ukrainian President Volodymyr Zelenskyy expressed gratitude for the EU loan, emphasizing that it strengthens Kyiv’s financial security and defence capabilities. “This is significant support that truly strengthens our resilience,” Zelenskyy said. “It is important that Russian assets remain immobilized and that Ukraine has received a financial security guarantee for the coming years.”

EU Loan Details and Repayment

The EU loan agreement includes provisions ensuring Ukraine will repay the funds only after receiving war reparations from Moscow. Until such reparations are issued, the frozen Russian assets remain untouched. The EU has also reserved the right to use these frozen assets as collateral to repay the loan, highlighting a careful approach to risk management.

One EU diplomat noted, “It’s good in the sense that Ukraine will secure funding for two years.” The deal follows complex discussions over the feasibility and legal implications of a loan based on frozen Russian funds, which proved politically and technically challenging.

Reactions from Russia and EU Diplomats

Russia criticized the EU’s decision. Kirill Dmitriev, a Kremlin envoy, called the move a “major blow to EU warmongers” and celebrated the bloc’s decision to avoid using Russian reserves. He specifically targeted EU Commission President Ursula von der Leyen, suggesting that voices of reason within the EU prevented what he considered an illegal use of Russian assets.

Meanwhile, EU diplomats emphasized that the decision reflects a pragmatic compromise. While some leaders had pushed for frozen Russian funds to finance Ukraine’s defence, legal risks—particularly in Belgium, which holds roughly €185 billion of the total €210 billion in frozen Russian assets—posed potential challenges, including financial and legal retaliation from Moscow.

Divisions Within the EU

The decision underscores continuing EU divisions over funding Ukraine. Hungary, Slovakia, and the Czech Republic opted out of contributing to the loan. Germany, the Netherlands, and other nations offered backing, while Italy, Bulgaria, and Belgium expressed reservations over potential liabilities.

Before the agreement, German Chancellor Friedrich Merz predicted a “50-50” chance of consensus, while Belgium’s Prime Minister Bart De Wever warned of legal and financial risks if frozen Russian assets were used. The final decision to borrow from capital markets avoided potential chaos and division within the EU.

Ukraine Urges Continued Support

Despite the EU loan, Ukraine’s Finance Minister Serhiy Marchenko cautioned that the current package might not fully meet Kyiv’s long-term financial needs. He emphasized the importance of a reparations-based loan, which would provide systemic, long-term financial security for Ukraine and help Europe safeguard against future conflicts.

Marchenko stated, “The reparations loan is a systemic, long-term solution. It will ensure sustainable defence capabilities and protect Europe from future conflicts. The risks to Europe from a potential defeat of Ukraine far exceed the risks of introducing the reparations mechanism.”