Germany, UK, and France Advance Plans to Utilize Frozen Russian Assets for Ukraine

European Powers Unite on Russian Asset Utilization

In a significant development, the leaders of Germany, the United Kingdom, and France have collectively agreed to advance efforts towards utilizing frozen Russian assets to fund the Ukrainian Armed Forces. The decision was reached during a phone call on October 10, 2025, involving UK Prime Minister Keir Starmer, French President Emmanuel Macron, and German Chancellor Friedrich Merz. This coordinated push seeks to increase pressure on Russia to end its full-scale invasion of Ukraine and address Kyiv's substantial financial needs.

Approximately $300 billion in Russian central bank assets were immobilized by Western allies and partners following the invasion in 2022. A significant portion of these assets, estimated at around €210 billion to €229 billion, is held within the European Union, primarily by the Belgium-based financial institution Euroclear.

Navigating Legal and Financial Complexities

The joint strategy emphasizes the need for coordination with the United States and other G7 nations to ensure a consistent and effective international approach. While the outright confiscation of Russian assets has been largely opposed by several EU countries, including Germany and France, due to legal concerns and potential financial risks, a consensus is emerging around alternative mechanisms.

One primary approach already in motion involves using the income generated from these frozen assets. The EU has agreed to direct interest earnings from the immobilized funds to support Ukraine, with Euroclear allocating €1.55 billion in 2024 and approximately €2 billion in March 2025. These funds contribute to military aid through the European Peace Facility (EPF) and other support initiatives.

The 'Reparations Loan' Proposal

The latest discussions, however, focus on a more ambitious plan: a 'reparations loan' mechanism. German Chancellor Friedrich Merz proposed an interest-free loan of nearly €140 billion to Kyiv, secured by the frozen assets. Under this plan, Ukraine would only be required to repay the loan once Russia compensates Ukraine for war damages.

The European Commission is exploring a proposal to leverage approximately €185 billion of the frozen assets at Euroclear as collateral for a loan to Ukraine. This mechanism aims to mobilize substantial funds without direct expropriation, thereby addressing concerns about international law and the stability of the euro as a reserve currency. This approach would allow for significant financial aid to Ukraine, which faces an external budget gap of $65 billion for the years 2026–2029.

Broader Strategy and Future Steps

Beyond financial measures, the leaders also condemned recent Russian attacks on Ukraine's energy grid and pledged continued support through the 'coalition of the willing'. The strategy will also include additional steps against Russia's 'shadow fleet', a network of aging tankers used by Moscow to circumvent sanctions. German Finance Minister Lars Klingbeil expressed confidence that legally sound ways would be found to utilize the assets, with European leaders expected to discuss the plan further at a summit on October 23.