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European leaders, together with those from the United Kingdom, are becoming more optimistic that a proposal to lend the Ukrainian government with a €140 billion loan backed by frozen Russian central bank deposits can be finalized by the end of the year, a move considered critical for Ukraine to sustain its military efforts.

Group of Seven Talks and EU Summit

Proposals from the EU executive were discussed at a meeting of G7 finance ministers in Washington last week and will be considered at an EU leaders summit on Thursday in Brussels. American involvement remains uncertain.

Poland's foreign minister said last week he was convinced “the matter of the utilization, on behalf of the target of invasion, of the frozen Russian assets is heading towards a happy resolution.”

He noted that an agreement was attainable by the end of the year: “It’s straightforward, either we use the aggressor's money or we will have to use our own resources. Don’t ask me which I prefer.”

Loan Mechanism and Legal Framework

Under the proposal – outlined in a two-page document by the EU executive last month – the EU would provide a €140 billion interest-free financial assistance to Ukraine secured by the Russian immobilized holdings stored at the Brussels-based financial agency.

The loan would be made on the basis that Moscow would utilize the immobilized funds to pay for war reparations when the conflict ends. “What we are suggesting is not seizure,” a high-ranking European Union representative informed journalists earlier this month.

Ukraine's Economic Requirements and Support

Ukraine has run an yearly financial shortfall as it has been resisting the Moscow's aggression. In the previous years, it has depended on allied governments to support it with additional loans. But increasing expenses and uncertain American backing are heightening the financial commitment on Kyiv's European allies.

In last month, Ukraine projected it would need $50 billion in external support for the coming year. In particular, European Union representatives think Ukraine will require an immediate injection of funds for its military operations from April 2026, with no sign of progress in peace talks.

Brussels' Involvement and Concerns

Belgium hosts €183 billion of frozen funds at Belgian the financial institution, and has requested specific guarantees that it will not be left alone with the bill, if the scheme fails, triggering a flood of lawsuits. It also wants more pressure on the G7 to adopt similar steps to support Ukraine.

Global Collaboration and Assurances

Part of the scheme is that G7 countries would club together to guarantee the loans, principally to comfort Belgium, where most of the Moscow's state assets, frozen at the beginning of the full scale conflict, are located.

The United Kingdom is expected to provide support to this aspect of the plan despite holding limited immobilized Moscow's funds directly. Negotiations are believed to be continuing over the contributions of each Group of Seven nation to these guarantees – including if the United States will play a part.

American participation is more doubtful, but the United States also only holds a small quantity of Moscow's financial holdings, at about $7 billion. Although White House backing will be seen politically and in legal terms important, it is not necessarily economically critical.

Legal and Diplomatic Hurdles

The plan depends on the funds remaining frozen solid. The EU executive is proposing to employ a rarely used mechanism in the European Union agreement to prevent one country, such as Moscow-aligned Hungary, blocking the renewal of European Union restrictions that support the immobilization of the holdings.

But legal experts at the EU member state body, which represents member states, are dubious about the lawfulness of the step, which would change restrictions to a qualified majority decision, instead of a unanimous one.