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Europe is quietly planning a more strategic counterattack – not sending troops or shipping weapons, but using frozen Russian state assets to provide five-year financial support to Ukraine.
«--[· 210 billion euro war chest ·]--»
The smoke on the Ukrainian battlefield has not dissipated yet. Europe is preparing a strategic operation sufficient to change the pattern of the war. Not to send more soldiers or additional weapons, but to use frozen Russian state assets to provide Ukraine with financial support for up to five years.
At the heart of the financial war, the Russian central bank has deposited €21 billion in overseas reserves in the European Clearing System (Euroclear) in Brussels, Belgium, which has been frozen by the European Union since the outbreak of the Russian-Ukrainian conflict in 2022.
Now, the European Union and the Group of Seven (G7) are promoting a highly controversial plan: to issue a "Ukraine reconstruction loan" with these assets as collateral, with a total estimated amount of 140 billion euros, which will be allocated to the Kiev government in installments.
More importantly, this loan is not a free aid, but a "post-war recovery mechanism" is designed. If Russia pays war compensation in the future, it will need to repay the loan first, and the remaining part can be unfrozen.
The logical chain of this plan appears to be tight, but it has sparked a wave of wrath in the international community. Russia has denounced it as a “financial piracy” and has continued to argue within the EU due to legal risks and political divisions.
After Russia launched a “special military operation” against Ukraine, the EU and the United States quickly launched the toughest sanctions in history, freezing Russia’s approximately $300 billion overseas assets, of which €2100 billion were located within the European Union, mainly in the European Clearing Bank of Belgium.
These assets were originally the foreign exchange reserves of the Russian Central Bank, which were used to maintain the stability of the ruble exchange rate and national financial security. It's easy to freeze, but how to use it has become a difficult problem. The EU initially used only the interest generated from the assets to aid Ukraine.
It is estimated that these assets generate about 3 billion euros of interest annually, 90% of which is spent on the purchase of weapons and 10% on the reconstruction of energy infrastructure.For example, in July 2024, the EU transferred 1.5 billion euros to Ukraine, of which 13.5 million were used for military purposes.
However, as the conflict prolonged, Ukraine's funding gap widened sharply. In 2025, Ukraine's defense budget will reach US $54 billion, accounting for 26.3% of GDP, while the full-year fiscal deficit is expected to account for 18.4% of GDP, and external financing needs will be as high as US $49 billion.
The European Union has been forced to consider mobilizing capital in June 2024, when the G7 and EU leaders reached an agreement allowing loans to be issued guaranteed by freezing assets. According to the plan, the EU will issue €140 billion in bonds guaranteed by asset returns.
Ukraine can use the funds in installments over five years for military expenditures, economic reconstruction and social welfare. This means that Ukraine can receive about 28 billion euros in support every year, equivalent to more than half of its military spending in 2025.
“The intense conflict within the European Union.”
Although the plan seems feasible, it has sparked fierce controversy within the EU. The core contradictions focus on legal legitimacy and financial risks. The opponents are represented by Belgium, Germany and France. Belgian Deputy Prime Minister Prevo bluntly said that confiscation of assets would "trigger systemic financial instability" and damage the credibility of the euro as a reserve currency.
European Settlement Bank chief executive Urban warned that the move could lead to Russia initiating legal proceedings, demanding compensation for losses and even freezing European financial institutions’ assets in Russia. Historically, Iran has sued Western countries for assets being frozen and eventually recovered some of its funds through international arbitration, a case that has shaken the heart of the EU.
What is even more difficult is the EU decision-making mechanism. According to regulations, sanctions against Russia require the unanimous consent of member states. Hungary repeatedly blocked relevant resolutions on the grounds of "violating EU laws" and sued the Council of the European Union. In October 2025, an informal meeting of EU leaders tried to promote the plan, but failed due to opposition from Hungary and Slovakia.
The supporters are represented by Eastern European countries such as Poland and Lithuania. They believe that Russia, as an "aggressor", should use assets to compensate for losses. European Commission Executive Vice President Dombrovskis cited international law as saying that "the aggressor must be responsible for the damage." Ukraine Prime Minister Shmegar even said that as long as he received frozen assets,"it does not matter if the West cuts aid."
The countries of Eastern Europe want security in exchange for supporting Ukraine, while the countries of Western Europe are more concerned about the damage to the financial system.
“Russia’s reaction...”
Faced with Europe's "financial strangulation", Russia quickly launched a counterattack. Russian President Vladimir Putin signed an order allowing Western investors to freeze assets in Russia in retaliation. In October 2025, the Moscow State Arbitration Court froze US$372 million in assets of Bank of New York Mellon and JPMorgan Chase. Russian Finance Minister Siluanov warned that if the West confiscates Russian assets, Russia will "tit for tat" and freeze more Western assets.
This confrontation could trigger a global chain reaction. emerging market countries such as China and India are highly alert to this.They fear that if the West willingly confiscates sovereign national assets, the security of its dollars and euro reserves will no longer exist.
In September 2025, Russia suspended gas deliveries to Europe, citing "equipment failures", sending German industrial costs soaring by 37%. If the conflict escalates, Europe may fall into the dual dilemma of "losing gas" and "losing money".
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Europe’s plan to activate Russia’s assets is essentially an economic battle. It tries to change the military balance by financial means, but it could cause greater political and economic turmoil. For Russia, it is a sovereign defense battle; for the EU, it is a defense of credibility; for Ukraine, it is a life-and-death defense battle.
Historical experience has shown that the winning of wars often depends on economic endurance.In the First World War, Britain supported the war by issuing government bonds, eventually leading to the decline of the empire; after the Second World War, Marshall planned to political goals through economic reconstruction.