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EU officials, together with those from the UK, are growing increasingly confident that a proposal to lend the Ukrainian government with a €140bn loan secured by immobilized Moscow's state assets can be agreed upon by the close of 2025, a step considered critical for Kyiv to sustain its military efforts.

Group of Seven Talks and European Union Summit

Proposals from the European Commission were reviewed at a meeting of Group of Seven financial chiefs in the US capital last recently and will be debated at an EU leaders summit on Thursday in Brussels. US participation remains unclear.

Radosław Sikorski stated last week he believed “the issue of the use, on behalf of the victim of invasion, of the frozen Moscow's funds is heading towards a favorable resolution.”

He added that an deal was attainable by the close of 2025: “It’s straightforward, either we use the invader's funds or we will have to use our own money. It's obvious which I prefer.”

Loan Structure and Juridical Framework

Under the plan – outlined in a brief document by the European Commission last month – the European Union would provide a €140 billion interest-free loan to Ukraine secured by the Russian frozen holdings held at the Euroclear institution.

The loan would be issued on the basis that Moscow would utilize the frozen funds to pay for conflict damages when the war concludes. “What we are suggesting is not confiscation,” a senior EU official told reporters earlier this period.

Kyiv's Economic Needs and Support

The country has faced an annual budget deficit as it has been resisting the Moscow's aggression. In the past, it has depended on allied governments to support it with extra borrowing. But increasing costs and unreliable American backing are increasing the economic burden on Ukraine's EU partners.

In September, Ukraine projected it would need $50bn in external assistance for the coming year. Specifically, EU officials think the country will require an immediate infusion of money for its military operations from spring next year, with no sign of progress in negotiations.

Belgium's Involvement and Worries

Belgium hosts €183bn of immobilized assets at Belgian the financial institution, and has requested detailed guarantees that it will not be left alone with the cost, if the plan fails, causing a slew of lawsuits. It also desires more influence on the Group of Seven to adopt similar steps to aid Kyiv.

Global Cooperation and Assurances

Part of the scheme is that G7 countries would collaborate to guarantee the debts, mainly to reassure the host nation, where the majority of the Russian central bank money, immobilized at the start of the full scale conflict, are held.

The UK is expected to make a contribution to this aspect of the plan even though holding limited frozen Moscow's funds directly. Negotiations are believed to be ongoing over the participations of each Group of Seven nation to these guarantees – including if the US will participate.

US involvement is more doubtful, but the United States also only holds a modest quantity of Moscow's financial holdings, at about $7bn. Though US administration backing will be seen in political terms and legally significant, it is not necessarily financially essential.

Juridical and Diplomatic Hurdles

The plan relies on the assets remaining frozen solid. The commission is proposing to use a rarely used mechanism in the European Union agreement to prevent a single nation, such as Russia-friendly Budapest, vetoing the renewal of EU sanctions that support the immobilization of the assets.

But lawyers at the Council of Ministers, which represents member states, are dubious about the legality of the step, which would shift restrictions to a majority vote, instead of a unanimous one.