A Cost-Free Reparation Loan that Costs Billions and Reconstructs Nothing - A Critical Look at the Wrangling over the Russian Assets Held at Euroclear

While Trump’s original peace plan appears to be off the table, his proposal to create an investment fund with Russian assets at Euroclear continues to reverberate. Many European leaders are now calling even more forcefully for these assets to be transferred to Ukraine without delay, before the Trump administration mobilises them with its own agenda—and for its own benefit.

The urge to act quickly is understandable, but it is at least as important to keep a cool head. The United States clearly cannot seize the Russian assets held at Euroclear without the EU’s consent. And the reasons for the EU to leave those assets untouched remain as compelling as ever.

Let’s recap. Since the United States is increasingly withdrawing its support for Ukraine’s war effort, Kyiv is primarily looking to the European Union for financial support of its war efforts. But the budgets of the EU and most EU Member States are deeply strained. Instead of financing Ukraine directly, the European Commission is therefore eying the €185 billion of frozen Russian Central Bank cash balances.

The Commission would require Euroclear to lend €140 billion to the EU—interest free. The EU would in turn extend a loan for the same amount to Ukraine, which Kyiv would only need to repay once Russia ends its war of aggression and pays reparations. Europe’s ‘reparation loan’ would thus constitute an advance on the financial reparations Ukraine is entitled to under international law. 

A treasure trove of €140 billion, seemingly free for the taking, appears hard to resist. But nothing comes for free. Indirect costs will inevitably surface elsewhere.

Robust guarantees for the risks borne by Euroclear and Belgium are, in any event, indispensable. A loan of such magnitude entails an enormous concentration risk for Euroclear. This should raise eyebrows under European banking regulation. A statutory exemption may resolve the issue formally, but does nothing to eliminate the risk. Euroclear is a systemically important institution: the settlement of the bulk of the trading on EU capital markets depends on its infrastructure. Its failure would bring Europe’s capital markets to a standstill.

The reparation loan also warrants scrutiny under international law. Third state countermeasures against Russia’s aggression which violate Russia’s state immunity are only justifiable if they are proportionate, temporary and reversible. Outright confiscation of frozen Russian assets would be problematic. A loan structure can, however, be considered temporary and reversible—insofar as Euroclear can repay Russia on first demand as soon as sanctions are lifted. And that’s where things get tricky.

It is not unlikely that Euroclear would need to repay Russia before Ukraine has paid back the reparation loan. War reparations, even if an international law obligation, are rarely paid in practice.   The odds of Ukraine ever reimbursing the loan are therefore slim. Also, in the event that the EU sanctions against Russia expire—they must be renewed unanimously every six months—Euroclear must, upon first demand, pay back the Russian Central Bank, even if Ukraine has not repaid the loan. 

[Update: on 12 December 2025, the Council has adopted a Regulation to establish the indefinite immobilization of Russian Central Bank assets at Euroclear. There is some discussion about the legal basis of this instrument (art. 122 TFEU), suggesting the legality of the Regulation may be challenged before the Court of Justice of the European Union. If that challenge were to be successful, the sanctions would be annulled and Euroclear would need to repay the Russian Central Bank on first demand.]

Well-drafted financial guarantees from the Member States could arguably mitigate the risk for Euroclear and Belgium. The reparation loan plan, however, raises other problems—and additional costs—that are less easy to solve.

The plan would cause serious collateral damage to Europe’s already ailing capital markets. Securities listed on a European exchange can only be held through a European central securities depository, and Euroclear is the largest such institution in Europe. If foreign powers gain the impression that their reserves held at Euroclear can be redirected at will for European policy objectives, their willingness to invest in European securities may well erode. The consequences for Europe’s capital markets—and for the European companies and governments that depend on them to meet their long-term financing needs—would be incalculable. The reparation loan risks to completely undermine the European Commission’s own recent efforts to strengthen Europe’s capital markets.

A final, elusive risk is geopolitical in nature: Russia views the reparation loan as highly provocative. Retaliatory measures against the EU, and Belgium in particular, are a real concern. 

And what’s to be gained by taking these risks? The most likely outcome is that Ukraine will not repay the reparation loan and that EU taxpayers will ultimately foot the bill. Why then assume the additional financial, reputational, and geopolitical risks of deploying Russia’s frozen assets at all? 

Relying on joint borrowings from the outset would be more straightforward and safer. It would provide Ukraine with predictable financing without jeopardising Europe’s capital markets, its credibility, and its geopolitical stability. The Russian assets held at Euroclear could subsequently—and hopefully soon—be used as leverage in peace negotiations for purposes that the proposed European reparation loan does not serve: the rebuilding of Ukraine.

English translation of an op-ed published in the Belgian newspapers De Tijd (Dutch) and L’Echo (French) on 26 November 2025.

Veerle Colaert is a Professor of Financial Law at KU Leuven University and co-director of the KU Leuven Jan Ronse Institute for Company and Financial Law.

Paul Dermine is Professor of European Union Law at the Université Libre de Bruxelles.