The idea for a 'Ukraine loan scheme' came from the €200 billion in Russian state assets frozen in European custodial accounts since the 2022 invasion. Those assests are just sitting there, earning interest and so some bright sparks in the EU had a bright idea: use that interest to help fund loans to Ukraine.
This may well sound ingenious in an 'aggressor pays the victim' sort of way, but it's really not that simple if you look at the detail and it turns out that while the EU is telling its citizens they're not paying for the loan, the truth may well be that they actually are paying!
The interest on the frozen Russian assets may generate a few billion a year, but this is a rounding error compared to Ukraine's actual financial needs. Kyiv is fighting a war of national survival and dealing with physical damage that the World Bank now estimates at over $500 billion. Interest flows aren't going to plug that kind of gap.
To date the EU has issued around $60bn worth of loans to Ukraine, a margin of around 10 times what the annual interest is on those Russian assets....
And there is simply no way Ukraine is going to be able pay this back, certainly not while the war is on, and probably not for many, many decades afterwards - I mean it took European countries decades to pay off their Marshall Loan debts. This isn't that different.
What I don't get is how this every got green lighted for being labelled as 'Russian Assets' fund loans, sure they help, but they are woefully insufficient.
Ukraine Needs Real Support — Not Creative Accounting
There is no real disagreement that Ukraine needs help. The question is how honest its allies are prepared to be about the price tag.
The United States, for all its political chaos, at least appropriates aid openly, even when Congress grumbles. The EU, meanwhile, seems to be determined at experimenting with this kind opaque financial engineering, rather than just handing out, well, aid!
Even EU officials acknowledge in private that, in the event of a prolonged war, the reconstruction bill could reach as much as €1 trillion (source: European Investment Bank, 2024). Yet the public messaging suggests that Russian interest payments alone will cover it.
What Europe is really doing is taking out a giant credit card in its own name and stapling Ukraine's flag to the application form.
Final thoughts...
As things stand, there's no sense that Ukraine is going to be able to pay these loans off, ever. Thus I guess this is going to fall on the shoulders of the EU taxpayers....
Damned war is just damned expensive!
Not sure why they don’t simply seize the frozen assets and turn them over to Ukraine rather than just keep skimming off the interest.
Since Trump has abandoned Ukraine, UK leaders have to decide whether they want to go all-in on helping Kyiv or accept Russian domination of Europe.
It's time for the EU to grow a pair, basically!
Because russia said that would make whoever did a legal target of the war.
Meh. Russia is already at (hybrid) war with Europe.
I think that the belief that these loans will be repaid is not realistic and honestly deceptive.
Agreed, it's dishonest!
Whatever is left of Ukraine after the war will have very unique trading deals with the lenders. Binding them through debt has worked incredibly well for China, having many countries in their pockets now due to the amount of debt owed. The debt itself is just part of the game - the contracts that are awarded afterwards are the real money maker.
Ah yes fair point, a punt on post-recovery!