Finland and Sweden Advocate for €130 Billion EU Loan to Ukraine Backed by Frozen Russian Assets

Nordic Nations Propose Innovative Financing for Ukraine

Finland and Sweden have formally urged the European Union to adopt a plan that would see frozen Russian central bank assets used as collateral for a significant loan to Ukraine. The proposal, put forth by Finnish Prime Minister Petteri Orpo and Swedish Prime Minister Ulf Kristersson, suggests a loan of approximately €130 billion to address Ukraine's critical financial requirements for 2026 and 2027.

The joint initiative was outlined in a letter submitted ahead of informal EU meetings held in Copenhagen, Denmark, on October 1, 2025. The core of the plan is to provide predictable and stable funding to Ukraine, with the understanding that the loan would only be repaid once Russia compensates Ukraine for war damages.

Details of the Reparations Loan Concept

The proposed financing mechanism, often referred to as a 'reparations loan,' builds upon earlier discussions within the EU. European Commission President Ursula von der Leyen first floated the idea in mid-September, aiming to leverage Russian funds immobilized in European banks. The loan is intended to cover Ukraine's estimated budgetary and military needs, which are projected to reach around €130 billion by 2027.

Key aspects of the proposal include:

• Using frozen Russian central bank assets as collateral, not direct confiscation.
• Repayment by Ukraine would be deferred until Russia pays war reparations.
• The initiative seeks to ensure a predictable flow of funding, warning that delays could leave Ukraine's military and civilian institutions vulnerable.

This approach aims to circumvent some of the legal complexities associated with outright seizure of sovereign assets while still utilizing the frozen funds to support Ukraine.

Context of Frozen Russian Assets and EU Deliberations

Currently, approximately €210 billion to €211 billion of Russian sovereign assets are frozen within the EU. A significant portion of these, estimated at around €185 billion to €194 billion, is held by Euroclear, a Brussels-based central securities depository. While the interest generated from these assets is already being used for a separate loan program for Ukraine organized by the G7, the new proposal seeks to leverage the principal for a larger loan.

The plan has garnered support from several EU leaders, including Danish Prime Minister Mette Frederiksen, who hosted the Copenhagen summit. However, legal concerns persist among some member states and the European Central Bank regarding the implications for international law and the stability of the euro as a reserve currency. The Kremlin has vehemently opposed any such move, labeling it 'pure theft' and threatening retaliation.

Path Forward for EU Support

The Finnish and Swedish proposal underscores the growing determination within the EU to provide long-term financial and military assistance to Ukraine, particularly as external support from other partners, such as the United States, faces uncertainties. The discussions in Copenhagen highlighted the urgency of finding a robust solution to Ukraine's funding needs, with a concrete need projected to arise as early as the second quarter of 2026. The European Commission is expected to continue developing a concrete proposal for member states to consider, aiming to secure a stable and predictable financial future for Ukraine.