Ministry of Foreign Affairs building in Kyiv, Ukraine. Tupungato/Adobe Stock

Following weeks of tense negotiations, at the eleventh hour on 19 December, EU leaders finally reached agreement on a €90bn loan to support Ukraine.

The deal came amid mounting speculation that the EU would use frozen Russian assets to help Ukraine fill its huge funding gap. The EU seized €210bn following Russia’s invasion of Ukraine in February 2022, and these assets are currently held in the clearing house, Euroclear, based in Belgium.

Before the EU loan was agreed, the International Monetary Fund forecast that Kyiv faced a €130bn funding gap for 2026-27, meaning that Ukraine was likely to run out of money to finance the war effort and public services in the next few months.

The concept of using frozen Russian assets to fund Ukraine has been mooted previously in both Canada and the US. US funding cuts have exacerbated Ukraine’s financial situation, putting pressure on EU leaders to consider using Russian assets to help plug the gap.

However, the proposal has raised growing unease that it could leave Euroclear vulnerable to further legal challenges from Moscow. Several legal experts have dismissed these concerns, saying Moscow had limited ability to pursue legal action through EU courts. In early December, Covington & Burling, suggested the risk of a successful legal claim against Euroclear had been ‘significantly exaggerated’ and that even a claim brought by Russia under its bilateral investment treaty (BIT) with Belgium ‘would face a multitude of obstacles leaving only the slenderest prospect of success.”

Other experts argued that any judgment handed down in Russian courts would not be recognised or enforceable in any EU member state or even the UK, including on public policy and jurisdictional grounds.

The threat of legal action still appeared real, however. In mid-December, Russia’s central bank filed a lawsuit in Moscow seeking billions in compensation from the clearing house for ‘damage’ caused by its alleged ‘illegal actions’.

Anne Fontaine is a Brussels-based lawyer and officer on the IBA Banking & Financial Law Committee. She believes it’s important to look at the market’s reaction to the perceived threat. ‘When you have a systemic financial institution like Euroclear,’ she says, ‘which is heavily based on trust and immunity of the Euroclear system against external factors, it is hard to contest that coercive measures affecting Euroclear’s assets are prejudicial to the reputation of Euroclear.’

She points to the reaction of the ratings agencies. On 16 December, Fitch placed Euroclear on ‘rating watch negative’ (RWN) in light of concerns raised by the EU’s proposal to use frozen Russian assets. ‘Fitch justified this decision “in view of potentially increased liquidity and legal risks” for Euroclear Bank and Euroclear Holding,’ said Fontaine. ‘Following the Council’s decision not to go the reparations loan route, Fitch placed Euroclear off the RWN on 23 December 2025.

EU leaders ultimately shied away from using the frozen assets. On 19 December, the EU said the €90bn loan would come from money raised on the capital markets secured against unallocated funds, or headroom, in the EU budget. European Council chief António Costa said the loan would only be paid back once Russia had paid reparations for the war.

The European Council also agreed to indefinitely immobilise the assets, allaying concerns that Kremlin-friendly member states like Hungary might veto the renewal of sanctions, or that countries like the US might try and use the assets as a bargaining chip to secure peace negotiations.

A Euroclear spokesperson told Global Insight: ‘We welcome the European Council’s decision on the funding option for Ukraine and remain committed to supporting the implementation of EU measures.’

Mucznik says the deal was an endorsement of the EU’s multilateral strength. ‘It shows that when a majority of member states prioritise an urgent issue, like support for Ukraine, they are capable of overcoming huge challenges to find a solution,’ she says.

As the EU is being forced to respond to increasing threats and a fundamental shift in the rules-based order, Mucznik says the EU’s approach may also signal the bloc’s gradual shift away from traditional unanimity-based decision-making towards more flexible arrangements, including so-called ‘coalitions of the willing,’ whereby a group of member states moves ahead after EU-wide consensus proves impossible. ‘While the EU’s rules limit how far this can go, debates around extending qualified majority voting in certain areas are also gaining momentum,’ she says. ‘The emergence of coalitions of the willing or “minilaterals” outside the EU framework to respond to specific needs are also a reality. In this case, Hungary, Slovakia and the Czech Republic opted out, yet the EU still found a way to act. This deal is an example of the EU finding ways to act in this new environment.’

Although the two-year loan is not a long-term solution, it demonstrates ‘the willingness of these states to continue supporting’ Ukraine, says Kateryna Gupalo, partner at Arzinger in Kyiv and Co-Chair of the Business Crime Committee. She says Ukraine also expects to secure further loans from other international partners and institutions, including the IMF. ‘Together, these combined efforts will help us navigate this critical period,’ she says.