EU Plan B for Ukraine Moves Forward as Belgium Blocks Reparations Loan
EU leaders are intensifying discussions around an EU plan B for Ukraine as Belgium continues to resist the bloc’s flagship reparations-loan proposal tied to frozen Russian assets. The ongoing deadlock has forced senior officials in Brussels to explore alternative financing mechanisms to keep Ukraine’s 2026 budget and defence operations functional.
At the centre of the dispute is the initial loan structure, which aimed to convert up to €185 billion in immobilised Russian state assets — the majority of which are held in Belgium’s Euroclear — into a zero-coupon debt instrument. Under that design, the EU would raise a substantial loan for Kyiv, while Ukraine would only repay it if Russia eventually pays legally recognised war reparations. However, Belgium argues that binding wartime funding to future reparations risks undermining peace negotiations and could expose the EU to prolonged litigation.
As the December European Council summit approaches, officials stress that the EU plan B for Ukraine is now the most realistic pathway. This plan pivots from a loan model to direct grants raised through EU-level capital-market borrowing. The shift would give Kyiv access to immediate, non-repayable financial support, helping prevent a severe fiscal shortfall in 2026. EU diplomats note that this approach is less vulnerable to legal challenge while also reducing friction among member states.
Credit-rating agencies have assessed that the reparations-backed loan would not automatically trigger sovereign downgrades, provided risks were evenly distributed across the bloc. Still, political cohesion appears strained, especially as Belgium insists that using Russian assets directly could jeopardize future international negotiations.
Another proposal gaining traction is the creation of a special-purpose vehicle (SPV) to hold and manage the frozen Russian assets outside Belgium’s jurisdiction. Advocates say this could address Belgium’s concerns, minimise the risk of Russian legal claims, and revive the original loan concept. Yet, shifting asset governance to an SPV would require intricate legal realignments, new political guarantees, and unanimous approval — hurdles that remain high in the current climate.
Without consensus, EU leaders fear Ukraine could enter 2026 facing funding gaps that undermine both defence operations and essential state functions. As a result, momentum behind the EU plan B for Ukraine continues to build. Officials suggest that market-raised grants could serve as a temporary bridge while the bloc works toward a longer-term agreement on the use of Russian assets.
The upcoming December summit will be decisive. Either EU governments rally behind a single financing framework, or the EU’s Plan B for Ukraine becomes the default, shaping Kyiv’s financial stability for the coming years.
