EU weighs bond swap plan to unlock frozen Russian assets for Ukraine, Politico reports
The European Commission is considering a new plan to funnel billions of euros from frozen Russian state assets to Ukraine by replacing the funds with EU-backed bonds, multiple officials familiar with the matter told Politico.
The proposal, described by one source as "legally creative," would allow Brussels to provide critical financial support to Ukraine without technically seizing the Russian capital—an act that would be fraught with legal risk.
The idea was presented behind closed doors on Sept. 11 to deputy finance ministers from EU member states. Officials from four delegations confirmed the discussions to Politico. While the plan was met with cautious optimism, no formal agreement has yet been reached. One source noted that a concrete proposal could follow soon.
Almost 210 billion euros ($245.85 billion) in Moscow's central bank assets have been frozen across the West since Russia's full-scale invasion of Ukraine in February 2022. The majority of these funds are held by Brussels-based clearing house Euroclear.
Under current EU law, only the interest earned on these assets—rather than the capital itself—can be lawfully redirected.
The Commission now proposes using these deposits to back what it is calling a "Reparations Loan" for Ukraine. The structure would involve issuing zero-coupon EU bonds, guaranteed collectively by member states, in exchange for the interest-generating cash.
The mechanism would function as an IOU — a form of promissory note or bond — effectively serving as a financial bridge to fund Ukraine now, with repayment deferred until Moscow fulfills its obligation for wartime damages. By using these IOUs, the EU avoids the legal complications of expropriating the principal of the frozen assets, while still mobilizing resources to support Ukraine’s defense and reconstruction.
"Ukraine will only pay back the loan once Russia pays for the reparations. The money will help Ukraine already today," Commission President Ursula von der Leyen told the European Parliament during her annual State of the Union address on Sept 9.
Officials say the proposal is aimed at helping Ukraine plug an expected 8 billion euro ($8.5 billion) budget shortfall next year, especially as donor fatigue grows and national budgets across the EU come under pressure.
The plan is designed to address concerns raised repeatedly by Belgium and Euroclear about the legal ramifications of outright asset confiscation. By offering bonds as a replacement mechanism, the Commission hopes to sidestep accusations of unlawful seizure.
To reassure Euroclear and participating states, the Commission has proposed that the bonds be jointly backed by EU countries. However, national guarantees for such a program would require unanimous approval among member states—a hurdle that has derailed similar efforts in the past.
Until now, the EU has been using the interest generated on these frozen assets to help repay its share of a 45 billion euro ($52.8 billion) G7 loan package to Ukraine. But with that loan nearly fully disbursed and Ukraine’s funding needs growing, Brussels is seeking new mechanisms to sustain support.
As the war grinds on, EU leaders continue to weigh various strategies for leveraging Russia’s frozen assets. The latest proposal signals a new attempt to balance legality, solidarity, and political will.
