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European leaders, including those from the UK, are growing increasingly confident that a proposal to provide the Ukrainian government with a €140bn financial package secured by frozen Moscow's state deposits can be finalized by the close of 2025, a move considered essential for Kyiv to maintain its defense operations.

Group of Seven Talks and EU Summit

Plans from the European Commission were discussed at a gathering of G7 finance ministers in Washington last week and will be debated at an European Union heads of state meeting on this week in the EU headquarters. American involvement remains uncertain.

Poland's foreign minister stated last week he believed “the matter of the use, on behalf of the target of invasion, of the frozen Moscow's funds is heading towards a happy resolution.”

He noted that an agreement was achievable by the close of 2025: “It’s very simple, either we use the invader's funds or we will have to rely on our own money. It's obvious which I prefer.”

Financial Package Structure and Juridical Basis

Under the proposal – outlined in a brief document by the European Commission last month – the EU would grant a €140 billion zero-interest loan to Ukraine based on the Russian immobilized holdings stored at the Euroclear agency.

The loan would be issued on the condition that Moscow would use the immobilized funds to cover war reparations when the conflict concludes. “What we are proposing is not seizure,” a high-ranking EU official told reporters earlier this month.

Kyiv's Financial Requirements and Support

Ukraine has faced an yearly financial shortfall as it has been resisting the Moscow's aggression. In the previous years, it has relied on allied governments to support it with additional loans. But rising costs and uncertain US support are increasing the financial commitment on Ukraine's European allies.

In September, the Ukrainian government projected it would need $50bn in international assistance for the coming year. In particular, EU officials believe Ukraine will need an immediate infusion of funds for its war effort from April 2026, with no indication of advancement in peace talks.

Brussels' Role and Worries

The nation hosts €183bn of immobilized assets at Belgian Euroclear, and has requested detailed guarantees that it will not be solely responsible with the cost, if the scheme fails, causing a flood of lawsuits. It also wants more pressure on the Group of Seven to take similar steps to support Ukraine.

International Collaboration and Assurances

An element of the proposal is that G7 countries would club together to underwrite the loans, principally to reassure Belgium, where most of the Russian central bank money, immobilized at the start of the full scale conflict, are held.

The United Kingdom is anticipated to make a contribution to this element of the scheme even though holding few immobilized Russian assets itself. Discussions are believed to be continuing over the participations of each Group of Seven nation to these guarantees – including if the US will play a part.

US involvement is more doubtful, but the US also only holds a modest amount of Moscow's financial assets, at about $7bn. Though White House support will be seen politically and legally important, it is not necessarily financially essential.

Legal and Diplomatic Challenges

The proposal relies on the assets remaining frozen solid. The EU executive is proposing to use a little-known procedure in the European Union agreement to stop one country, such as Moscow-aligned Budapest, blocking the extension of EU sanctions that underpin the freezing of the assets.

But legal experts at the EU member state body, which acts for member states, are skeptical about the legality of the step, which would change restrictions to a qualified majority decision, rather than a unanimous one.