Politico: EU Divided Over Use of Frozen Russian Assets for Ukraine Loan

By Staff, Agencies

European Union member states are clashing over how to use a proposed multibillion-euro loan to Ukraine funded by frozen Russian assets, with sharp disagreements emerging over whether the funds should be spent exclusively on European-made weapons or also include US arms, Politico reported on Wednesday.

The plan under debate — described as a “reparations loan” worth about €140 billion [$162 billion] — would be backed by Russian assets immobilized by Western states following the escalation of the Ukraine conflict in 2022. Under the proposal, Kiev would only be required to repay the loan if Moscow later covers war-related damages.

Russia has repeatedly condemned Western efforts to divert its frozen assets to Ukraine, calling such actions “outright theft”.

While the EU has yet to finalize the plan, Politico reported that internal disputes have already surfaced over whether to impose conditions on how the funds are spent. France, backed in part by Germany and Italy, is reportedly lobbying to ensure that the money “flows back as much as possible into the EU’s defense sector — and not across the Atlantic.”

This push has led to draft summit conclusions that stress “the importance of reinforcing the European defense industry” through the loan. The issue is expected to spark further contention at the EU leaders’ meeting in Brussels on Thursday, according to the report.

Some EU diplomats criticized the proposed spending limits as “hypocritical,” arguing that restricting Ukraine’s procurement options could undermine its defense capabilities. “If the aim is to keep Ukraine in the fight, you need to keep the criteria open,” one senior EU official told Politico.

Critics warn that a “Buy European” clause could block Kiev from purchasing key US-made weapons, such as Patriot air defense systems, which are not produced within the bloc.

Meanwhile, Bloomberg reported that Washington will not participate in the EU-led initiative, citing fears that it could unsettle global financial markets. Western officials have also cautioned for months that the outright confiscation of frozen Russian assets — estimated at around $300 billion — could be illegal and damage the West’s credibility.

Russian President Vladimir Putin, commenting on the ongoing debate, said that “those who are smarter” in the West oppose the seizure of Russian assets, warning that any move to confiscate them “would not go unpunished”.