‘The Spectator’: The Kremlin has its own ways to retaliate if Europe seizes its sovereign capital

The heated talks in Brussels pitted Ukraine’s most passionate supporters from Scandinavia, the Baltics, Poland and Germany against the less belligerent and more cautious Italy, plus the usual Ukraine-sceptical Hungary and Slovakia, as well as Bulgaria, Malta, and Czechia and Belgium itself, ‘The Spectator’ notes.

Talks failed after several key allies disagreed about the ‘legal’ part of Zelensky’s plea.

‘Italy obviously considers sacrosanct the principle that Russia should primarily pay for the reconstruction of the nation it attacked,’ said Italian prime minister Georgia Meloni, who has been a passionate supporter of Kyiv but who unexpectedly emerged as a leading opponent of the reparations loan. ‘But this result must be achieved on a solid legal basis.’ Simply confiscating the assets is not something a civilisation that claims to uphold the rule of law can do without undermining the very principles it claims to be defending.

German Chancellor Friedrich Merz had insisted that the reparations loan was Europe’s ‘only option’ to support Ukraine and that using the Russian assets would be ‘a sign of strength and determination’. But Merz overlooked another, rather more obvious option – that Europe could actually find the money to support Ukraine itself out of its collective €17.9 trillion (£15.6 trillion) annual GDP.

Yet debate there was. Usually the European Council makes all its decisions by unanimous vote. But European Commission President Ursula von der Leyen – who earlier this week controversially invoked emergency EU legislation to freeze the Russian funds indefinitely – made the reparations loan a matter for the rarely-used Qualified Majority Voting (QMV) which requires 55 per cent of member states representing 65 per cent of the EU population to pass a motion. In the end, even this procedural manoeuvring failed to get the reparations loan across the line.

Russia assets in Europe VS European assets in Russia

Russia is not in a state of war with Europe or any other country other than Ukraine. There is no international court, nor any clear legal mechanism, for confiscating the €290 billion (£250 billion) in sovereign assets that the Kremlin has deposited worldwide (including some £24 billion in the UK, €17 billion (£15 billion) in France and $5 billion (£3.7 billion) in the US).

The prospect of forcing Russia to pay war reparations is non-existent until the Kremlin is actually defeated – which at the moment appears unlikely. So when the war eventually ends, Moscow will sue to have its money returned – and under Belgian law, it would win.

The Kremlin also has its own ways to retaliate if Europe seizes its sovereign capital. By various estimates there are between $127 and $288 billion (£95 and £215 billion) worth of Western assets still trapped in Russia. According to the Kyiv School of Economics (KSE) some 2,315 Western companies that are still actively operating in Russia, including Austria’s Raiffeisen and Italy’s UniCredit banks. BP still owns a 19.75 per cent stake in the oil giant Rosneft, while the Financial Times reports that the US investment giant JP Morgan has around $2.5 billion (£1.9 billion) still invested in Russia. Foreign companies earned a tidy $19.5 billion (£14.6 billion) in profits in Russia last year, KSE reported – but under wartime legislation, they are unable to take those profits out of the country.

The Kremlin could easily confiscate those assets in a tit-for-tat – paradoxically leaving Putin cash-richer than before, since the funds in Europe are frozen but the capital of Western businesses in Russia is within his reach.

Ukraine is living on borrowed time

The bottom line for Ukraine is that its economy and war effort rely entirely on Western aid – and with funding from the US cut off by Trump since February, in practice that means that Europe must find a way to foot the bill. Just to maintain current levels of spending, Ukraine requires some €137 billion (£120 billion) in 2026 and 2027. But even the €140 billion (£123 billion) reparations loan that failed this week would not have been a silver bullet to fix Kyiv’s financial black hole. Europeans insisted that €45 billion (£39 billion) of the money be used to pay back a loan made in November 2024, knocking the net payout down to €95 billion (£83 billion). Another chunk would also have gone on expensive armaments from Germany, France and Sweden, all of whom have signed massive arms deals with Zelensky that would have ensured that a large slice of the reparations loan would have ended up in the pockets of European arms manufacturers.

With the reparations loan dead, or at least stalled, Kyiv’s financial life support has become more precarious than ever. The Americans continue to attempt thrashing out peace, while Europe has plumped for continuing to fund the war. That leaves Ukraine living, quite literally, on borrowed time.

Poor Europeans – EU to pay €3B a year in interest for Ukraine loan

EU taxpayers will have to pay €3 billion per year in borrowing costs as part of a plan to raise common debt to finance Ukraine’s defense against Russia, according to senior European Commission officials, POLITICO reveals.

The bloc’s leaders agreed in the early hours of Friday to raise €90 billion for the next two years, backed by the EU budget, to ensure Kyiv’s war chest won’t run dry in April.

Many of the hallmarks of the €210 billion financing package for Ukraine will be transferred to the new plan for common debt. These include payout structures in tranches, anti-corruption safeguards, and an outline for how much money should be spent on Kyiv’s military and the country’s budgetary needs.

European governments resorted to joint debt after failing to agree on a controversial plan to leverage frozen Russian assets across the bloc.

The new plan would provide Ukraine with €45 billion next year, handing Kyiv a crucial lifeline as it enters its fifth year of fighting. The remaining funds would be disbursed in 2027.

The new plan won’t come cheap. The EU is expected to pay €3 billion annually in interest from 2028 through its seven-year budget, which is largely financed by EU governments, senior Commission officials told reporters on Friday. Interest payments would begin in 2027, but would cost only €1 billion that year.

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