US peace plan throws reparations loan into disarray

The new peace plan promoted by the United States has thrown the European Union’s proposal to use Russia’s immobilised assets to assist Ukraine into disarray.

In a dramatic reversal for the EU, the US-led plan suggests the Russian assets would be unblocked, released and turned into an investment platform handled by Washington. The language implies the Kremlin would not only be spared from paying war damages in a future settlement but also benefit commercially.

The plan, which has been presented to Kyiv for negotiations, goes directly against the EU’s goal to make Russia pay for the destruction caused as a result of the war and issue a reparations loan to support Ukraine’s financial and military needs.

Ukrainian President Volodymyr Zelenskyy said on Friday that his country is facing “a very difficult choice: either loss of dignity, or the risk of losing a key partner” in reference to the US. The Trump administration is pushing an aggressive timeline on Kyiv to secure an agreement by the end of next week.

The 28-point blueprint, drafted without European input and directly negotiated with Moscow, includes a section that addresses the immobilised assets of the Russian Central Bank, estimated to be worth about €300 billion across G7 jurisdictions.

The text pitches the creation of two separate funds: one led by the US with European participation to finance Ukraine’s post-war reconstruction and another shared by the US and Russia to develop “joint projects in specific areas”.

Point 14 says, “$100 billion in frozen Russian assets will be invested in US-led efforts to rebuild and invest in Ukraine. The US will receive 50% of the profits from this venture. Europe will add $100 billion to increase the amount of investment available for Ukraine’s reconstruction. Frozen European funds will be unfrozen.”

The remainder of the frozen Russian funds, the text also reads, would “be invested in a separate US-Russian investment vehicle that will implement joint projects in specific areas. This fund will be aimed at strengthening relations and increasing common interests to create a strong incentive not to return to conflict.”

As a result, Moscoq would secure a lucrative arrangement after the war it started.

Still, the language of the leaked plan is vague, and it is far from clear how these asset-based funds would work in practice.

It does not explain whether the $100 billion that Europe would provide to the fund would derive from the Russian assets or how they would be employed to rebuild Ukraine.

That puts Europeans in a tight spot and adds to hesitations about the reparations loan, which would only work if the assets stayed paralysed until Russia agreed to compensate for the damage. By contrast, Washington’s plan seeks to profit from the assets as it previously did with Ukraine’s mineral resources.

Publicly, the EU insists it will march ahead with the reparations loan.

“I can confirm that the ongoing intense work on the immobilised Russian assets will continue,” the chief spokesperson of the European Commission said on Friday.

Privately, officials and diplomats concede the US peace plan, drafted without European input, seriously risks derailing the EU’s strategy and leaving the bloc powerless.

As the bulk of the Russian assets are kept on EU soil, the 27 still retain strong leverage over Moscow. But Point 14 would effectively dismantle any pressure that the EU could exert in talks and put the bloc on the back foot.

Pros and cons: a delicate balancing act

Even before the 28-point peace plan emerged this week, the reparations loan was facing an uphill struggle to become a reality, with Belgium leading the resistance.

The country hosts Euroclear, the central securities depository that guards €185 billion of the Russian assets, and holds the key to unlock the proposal. Belgium demands airtight guarantees from other member states to shield itself against Moscow’s retaliation.

Without “strong guarantees” and “contractually defined risk coverage”, Belgium will never give its consent, Prime Minister Bart De Wever has said.

Separately, Slovakia says it will not approve the loan if it provides military aid to Kyiv, while Hungary is firmly opposed to the entire project, calling it “categorically absurd”.

Meanwhile, Germany, Poland, the Nordics and the Baltics strongly favour the loan.

“For me, there is no alternative,” Danish Prime Minister Mette Frederiksen said last month, ruling out fresh debt. “To be honest, it’s the only way forward, and I really like the idea that Russia pays for the damages they have done and committed in Ukraine.”

A sizable group of member states, including France and Italy, have not yet made up their minds and want to consider the two other options presented by Ursula von der Leyen in a letter to EU leaders this week and seen by Euronews. The letter was sent days before the US-Russian plan leaked to the press.

• Option 1: bilateral contributions from each member state.
• Option 2: common borrowing at the EU level.
• Option 3: the reparations loan based on the Russian assets.

Diplomats consulted by Euronews admit that Option 1, or bilateral contributions, is a no-go as it would be provided on a voluntary basis and could create deep divergences among member states, those willing to contribute significantly and those opting out.

Option 2 is seen as more realistic.

Firstly, joint borrowing would ensure a common European approach to funding Ukraine. It would remove the legal uncertainty stemming from the fate of the Russian assets.

Yet, it would have an immediate fiscal impact on member states, who would be asked to pay the interests connected to the issuance every year. (Ukraine would only repay the principal if Russia agreed to compensate for the damages.)

The EU budget could be deployed as an extra guarantee for joint debt. But doing so would require unanimity, a tall order given Hungary’s vehement opposition to assisting Ukraine in any capacity.

Lastly, Option 3, the reparations loan, is seen as advantageous because it would involve fresh debt, not interest payments, and for the cash-strapped member states, no additional pressure on national budgets while still funding Ukraine.

However, it would require “legally binding, unconditional, irrevocable and on demand guarantees” to cover not only the credit but also any possible arbitral rewards, von der Leyen has warned. The loan could also trigger “knock-on effects” on the eurozone if foreign investors perceive it as confiscation, which is illegal.

This, according to diplomats speaking to Euronews, is a point that is not treated lightly by member states who worry that financial markets could react negatively and Russia could sue and win.

The pros and cons are weighing heavily in the minds of influential countries with high levels of debt, such as France, Italy and Spain, who would have to chip in according to their economic size under any scenario.

Initially, the EU hoped to seal a deal on how to finance Ukraine’s needs for 2026 and 2027 during a crunch summit of leaders on 18 December, using one or a combination of the options outlined by von der Leyen.

But the US peace plan, which has sidelined the Europeans, coupled with the lingering doubts about the reparations loan, has left the deadline up in the air.