The European Union has signaled a significant 'Plan B' for funding Ukraine, suggesting it could turn to frozen Russian sovereign assets if its primary €90 billion loan package faces further delays.
This situation escalated after Kaja Kallas, the EU's foreign policy chief, made it clear that patience is wearing thin. The primary plan, or 'Plan A', is a €90 billion loan framework designed to support Ukraine through 2026-27. This package allocates €60 billion for defense and €30 billion for macroeconomic stability. It’s a crucial lifeline intended to cover about two-thirds of Ukraine's projected funding needs.
However, this plan is currently hitting a wall. The EU often requires unanimity for major financial decisions, and Hungary has threatened to veto the package. This opposition creates a serious risk of delaying the first disbursement, which is targeted for the second quarter of 2026. The gridlock not only jeopardizes Ukraine's ability to defend itself but also puts its overall economic stability at risk, which is closely monitored by partners like the IMF.
This is where 'Plan B' comes into play: using Russia's frozen assets. The EU has already been channeling the windfall profits generated by these assets—roughly €210 billion held within the bloc—to Ukraine. These profits amount to several billion euros per year. Kallas's recent comments, however, suggest a willingness to go a step further. The EU may consider using the principal of the assets themselves, possibly as collateral for a 'reparations loan.'
Ultimately, this is a high-stakes strategic move. By publicly discussing the use of Russian assets, the EU is applying maximum pressure on Hungary to drop its veto. It sends a clear message: if the straightforward path of a joint loan is blocked, the EU is prepared to explore more legally complex and politically bold alternatives. The debate is no longer just about securing funds, but about the EU's resolve and its ability to overcome internal divisions to support Ukraine.
- Glossary -
- Frozen Assets: Sovereign assets of a country, such as central bank reserves, that are held in foreign financial institutions and have been immobilized, meaning they cannot be accessed or moved by the owner country.
- Enhanced Cooperation: A procedure in EU law that allows a minimum of nine member states to establish advanced integration or cooperation in an area within EU structures but without the other member states being involved.
- Windfall Profits: Unexpectedly large profits earned on the frozen assets, primarily due to interest rate changes, which are not part of the original principal amount.