Europeans Look for Options as Costs Mount in Ukraine

Ukrainian Finance Minister Serhii Marchenko was in Brussels on September 28, when a Russian drone flew into the National Academy of Sciences, one of the country’s leading research institutes and a symbol of Ukrainian identity. Moscow’s new strategy of round-the-clock bombardment of civilian targets was already more than a month old, but the strike, which killed two academy employees, still came as a shock. The elegant 19th-century building in the center of Kyiv burst into flames, and a huge cloud of black smoke billowed from the open roof as terrified researchers inched out onto window ledges before climbing down ladders to the street.

“War is longer, war is harder,” Marchenko explained soberly to his audience in Belgium. “Russian jet drones are destroying our logistics, our retail storage, our refueling stations, our data centers.” Tax and customs revenues are falling short of expectations, and Kyiv will need more help than anticipated to get through the winter, not to mention the year ahead.

For many in the minister’s audience in Brussels, it isn’t a question of whether to help, but how—where to find the money. Unlike President Donald Trump, who moved last week to lift sanctions on Russian diesel exports, Europe is determined to stand with Ukraine and keep the pressure on Moscow. “There’s no option where we do nothing,” centrist French member of the European Parliament Nathalie Loiseau explained to me a few days after the academy bombing. “We can’t say to Ukraine, ‘Okay, you’re on your own,’” leaving Kyiv to lose a war that many Europeans believe is all that’s stopping Vladimir Putin from turning his guns on NATO.

But after nearly five years of fighting, Europeans are running out of options, which is why the debate is circling back again to an idea proposed and rejected several times in the past—leveraging the Russian Central Bank assets held in European financial institutions.

Europeans—both nation-states and the European Union—have tried just about everything else. Continental capitals have donated $152 billion in military, financial, and humanitarian aid. European institutions have allocated an additional $107 billion—bringing the European total to nearly twice Washington’s $130 billion. Many countries have dug into their own weapons stockpiles to send planes, tanks, and missile systems. Others have invested directly in the Ukrainian defense industry, enabling it to produce drones, missiles, and other weapons for use on the front.

Much of this assistance came directly from European taxpayers. But when that wasn’t enough, the EU turned to the Russian assets in European financial institutions. The EU froze these funds—just over €210 billion in repositories across the continent—days after the Russian invasion of Ukraine in February 2022. Then, in 2024, as other funding ran out, the bloc began to think about how to tap the money.

The first step—taken only after months of EU debate—was to skim off the interest earned on the frozen accounts, channeling the revenue to Ukraine as a cash contribution. More than a year later, when that wasn’t enough to meet Kyiv’s growing needs, the union considered borrowing against the Russian funds and lending the proceeds to Ukraine. After another prolonged debate, members rejected this option, voting instead to borrow against the EU’s own budget for a €90 billion loan to Ukraine—money meant to cover Kyiv’s unmet funding needs through the end of 2027.

Still, as finance minister Marchenko and others have made clear in recent weeks, even this will not be enough. Just to get through the end of 2026, according to Prime Minister Serhii Koretskyi, Kyiv needs an additional $27 billion. As for 2027, Marchenko told his audience in Brussels, Ukraine faces a budget gap of $32.6 billion and a second shortfall of $45 billion to cover unmet defense expenses.

Staggering as the numbers are, they don’t surprise EU officials like parliamentarian Loiseau, a former career diplomat with a brown bob and round, open face. Loiseau and a small group of international legal and financial experts understood from the start that Kyiv was heading into a long war with an unpredictable price tag. “The €90 billion is just enough for Ukraine to survive,” Loiseau asserts, “but not enough for Ukraine to prevail.” That’s why she and her allies set their sights on the frozen assets—in their eyes, the only long-term answer for covering what they see as the West’s costs in Ukraine.

It was British financial journalist Hugo Dixon who brought the group together in early 2024, and the idea of using the frozen assets was based on an American precedent: George W. Bush’s 2003 decision to appropriate $1.7 billion in Iraqi assets in U.S. banks—money later used for postwar reconstruction in Iraq.

Dixon’s group draws a line at seizing enemy assets. “We do not propose to confiscate the money,” Loiseau insists. “We have no right to do that—and we respect the rule of law.” What the group proposes instead—an idea they call the “Russian Transfer“—is to use the funds as a wartime advance against what Moscow will owe Ukraine in postwar reparations.

Dixon and the others see the 2022 UN General Assembly vote declaring Russia the aggressor in Ukraine as an all but certain guarantee that Moscow will be legally bound to pay reparations. But Ukraine needs the money now, and the EU can advance it as a loan. In the unlikely event that the Kremlin were to agree to reparations, Ukraine would have to repay the loan, and Moscow could reclaim its frozen assets.

The EU debate a year ago put this idea to the political test, and it failed miserably, foundering on Belgium’s stubborn refusal to participate. The Dixon group blames EU Commission President Ursula von der Leyen, who they say, borrowed their idea, garbled it, left out several essential components, and tried to ram it through politically without the necessary consultation and persuasion. “She prepared exactly no one,” Loiseau complains—no private conversations, no “massaging of egos,” no listening to others’ input, no consensus-building. “She wanted to be the lone mother, and she killed the baby.”

The Dixon group has taken the opposite tack—they’re now heading into a third year of arduous, behind-the-scenes lobbying and consensus-building. Even more important, they want to correct what they see as Von der Leyen’s misappropriation of their idea—restoring the essential steps she left out and the guarantees she forgot to offer. (Von der Leyen remains a staunch advocate of finding a way to use the frozen assets to augment EU support for Ukraine.)

It’s no accident that Belgium was at the heart of last year’s debate and the final obstacle to enactment. The lion’s share of the Russian assets frozen in Europe—some €180 billion of the €210 billion total—are held in Belgium in the privately owned financial services company, Euroclear.

Many Belgians believed that Von der Leyen’s proposal to use the money for a Ukraine loan would make them a priority target for Russian retaliation, and they weren’t wrong. Even as debate swirled in the EU, a wave of mysterious drone sightings forced Belgium to close its two biggest airports. According to Loiseau, several Belgian decision-makers also received personal threats. “Classic mafia tactics,” she says angrily. “But no surprise. The gang running Russia today is a mafia.”

The Dixon plan—both the original 2024 version and the one under discussion now—has an answer for this. It sounds technical—a distinction without much difference. But according to the group’s lawyers, it would make all the difference in the world. The core idea: the EU would transfer the entire Belgian account—not just the assets, but also Euroclear’s liability to the Central Bank of Russia—to a new financial vehicle controlled by the European Commission.

Belgian officials could argue that the EU made them do it, absolving Brussels of responsibility for relinquishing the money. Alongside the transfer, the EU would agree to compensate Belgium and Euroclear—and other Western repositories that agreed to transfer assets—for any financial losses they incur as a result.

Perhaps most meaningful, if Moscow decided to retaliate, it would now have to go after the entire EU, not just tiny Belgium. “If Russia wants to sue someone,” Loiseau explains. “They will have to sue the European Commission. Be my guest—they’re welcome to try. They will never prevail.”

Loiseau sounds a little weary when she describes the Dixon group’s two-and-a-half-year, continent-wide lobbying campaign—tours of European capitals, jawboning fellow members of the European Parliament, importuning the European Commission, and more than a dozen high-profile op-ed pieces. But she thinks the campaign is paying off, particularly in the European Parliament, where she says all the pro-European political groups and a majority of legislators are on board. A handful of national capitals have also come out in favor. But many are still noncommittal, and Belgium remains a potential obstacle.

Still, Loiseau is convinced the hard work will bear fruit, including with the dug-in Belgians. “They need to be reassured and pressured at the same time,” she explains, crediting a kind of old-fashioned politics we’ve almost forgotten in the U.S. “You meet, you talk, you argue. Maybe you give a little to reassure the other side. Then you go back and forth until, in the end, everybody believes it’s their idea.”

Meanwhile, as important as the lobbying campaign may be, circumstances on the ground in Europe are changing. A punishing trifecta of U.S. tariffs, Chinese competition, and energy shortages triggered by the fighting in Ukraine and Iran is choking the European economy. Nearly one-third of EU member states are facing budget crises, and only a handful are growing at anything like a healthy rate.

The last thing most governments want to do is to raise taxes, asking voters to foot a growing bill for increased support for Ukraine. Watershed national elections loom across the continent—in France, Spain, and possibly Germany, among other countries. And the EU is under pressure to trim, not increase, its next seven-year budget—a deal members hope to lock down before the end of 2026.

Bottom line: deploying the Russian assets on behalf of Ukraine remains a tough slog, with many in Europe still unpersuaded and others actively opposed. But it looks increasingly—to the Dixon group and others—like the only possible long-term answer.

What can the U.S. do?, I ask Loiseau as our conversation winds down. “Wake up!” she exclaims impatiently. The U.S. holds only about $5 billion of the $300 billion in Russian sovereign funds frozen in repositories across the West. Still, Loiseau says, every little bit helps.

“What’s important is that Moscow feels the pressure,” she explains. “We need to make clear that we’ll stand with Ukraine not just ‘for as long as it takes,’ as Joe Biden often said, but also for as much as it takes. Putin needs to hear this from Europe, but it would also help to hear it from the U.S. This is our only hope of bringing him to the table for a serious negotiation.”

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