The ECB refused to guarantee a reparations loan of 140 billion euros. Does Ukraine have other options?

The European plan to use frozen Russian assets to finance Ukraine is falling apart. The European Central Bank refused to become the "lender of last resort" in the €140 billion reparations loan scheme. This is a key element on which both the financing mechanism itself and Ukraine's new program with the IMF depended.

Now, the European Union is urgently looking for ways to back up Euroclear – the global securities center that holds the largest single pool of frozen Russian central bank assets outside of Russia. And also to preserve the chance to unblock billions.

The ECB's refusal does not stop the idea of a reparations loan, but it significantly postpones it. What will be the consequences of this and are there other realistic alternatives – we investigated LIGA.net

Why a guarantee from the European Central Bank is needed

The mechanism for providing financial assistance to Ukraine using frozen Russian assets has not yet been fully worked out. Essentially, the idea is to provide Ukraine with a reparations loan secured by these funds. Various amounts are being discussed, with figures often around 140 billion euros.

The problem is that Russian funds are scattered across many countries, and these are not only EU countries. Therefore, a mechanism is needed that would allow them to be consolidated and used. Since the main part is stored in Euroclear, the attention of the international community is focused precisely on this system – a Belgian structure that is an operator of long-term investments and is not a state institution. This is in a comment. LIGA.net says Ihor Burakovskyi, chairman of the board of the Institute for Economic Research and Policy Consulting.

Euroclear is one of the world's largest international securities depositories, located in Belgium. It holds and services transactions in bonds, equities, and other financial instruments for banks, governments, and large investors.

In fact, this is the infrastructure through which transactions are processed and where assets worth trillions of euros are stored. This is where the largest portion of Russian banking reserves is currently blocked.

Euroclear and Belgium are demanding guarantees, says Burakovsky. "The concern is that if something goes wrong and Belgium has to return these funds. Therefore, the risks must be borne by the European community or the participants in this scheme," he explains.

The European Central Bank was supposed to be the guarantor, but according to its statute, it cannot directly finance governments. Burakovsky adds that the EU cannot force Belgium or Euroclear to implement this scheme. Financial law in the EU is not unified, and there is no body that could directly influence Euroclear. Therefore, coordinating the interests of individual countries is extremely difficult. In other areas, such as foreign trade, everything is simpler because agreements are signed by the European Commission on behalf of the Union.

The European Commission has now begun to look for alternative options that could back up a potential reparations loan and guarantee liquidity in case the assets have to be returned to the Russian central bank. After all, without a clear and legally secure structure, the EU, member states, and private entities risk facing international obligations that they will not be able to fulfill.

What will be the consequences

The ECB's refusal to provide a guarantee seriously complicates attempts to unlock a financial resource that could bring Ukraine 45 billion euros annually for three years – from 2026 to 2028. According to the European Commission's plan, it was the state guarantees of member countries that were supposed to distribute the risks of repaying possible obligations. But Brussels concluded that in an emergency, states would not have time to raise such an amount. That is why the idea of appealing to the ECB arose.

The EU has already postponed the decision on the "reparation loan" of up to 140 billion euros until December. This decision, in particular, will also determine Ukraine's new loan program with the IMF.

"This is really bad news," he wrote in his Telegram channel Head of the Financial Committee of the Verkhovna Rada Danylo Hetmantsev.

For Ukraine, receiving the reparations loan is very important. Currently, the ECB has not agreed with the proposed mechanism, but this rather postpones than cancels the receipt of the reparations loan. This was stated in a comment LIGA.net said Taras Kotovych, a senior financial analyst at the ICU investment group.

"The EU is unlikely to leave Ukraine without financial support, and the use of Russian assets is the best option; all that remains is to agree on a mechanism that suits both Belgium and Euroclear. Currently, only a delay in the receipt of funds is possible," says Kotovych.

To avoid this delay, other mechanisms can be used – for example, accelerating the receipt of aid volumes already agreed for the next year by shifting them to the beginning of the year.

Another option could be to provide a loan to Ukraine in an amount that would, for example, cover the budget's needs in the first quarter of 2026. And then repay it with funds from the reparations loan.

"There are no other alternatives at the moment, as Ukraine is unlikely to be able to issue a large volume of Eurobonds, and the domestic market will not be able to provide similar volumes of funds in a short period of time," Kotovych adds.