EU leaders have failed to approve a €140 billion ($162 billion) loan for Ukraine backed by proceeds from frozen Russian sovereign assets after Belgium refused to support the plan, citing fears of legal and financial retaliation by Moscow.

The leaders met on Thursday in Brussels to discuss a “reparations loan” using income generated from roughly €190 billion ($220 billion) in immobilized Russian state funds held by the Brussels-based clearing house Euroclear. The plan was intended to provide Ukraine with predictable funding as the war continues, especially after the U.S. halted direct financial support to Kyiv’s budget.

Belgium Blocks Euroclear-Based Plan Over Legal Risks

Belgium demanded legal guarantees ensuring that it would not incur losses or face sanctions risk should Russia retaliate against the measure, Financial Times (FT) wrote. The assets in question are held primarily under Belgian jurisdiction through Euroclear.

Leaders of 26 EU member states – with Hungary abstaining – instructed the European Commission to “present, as soon as possible, options for financial support based on Ukraine’s financing needs,” not mentioning the reparation loan directly, FT reported.

EU Postpones Decision Until December Summit

The EU pushed the decision to their next summit in December. The EU Commission is expected to present the options for the legal framework by the next European Council on Dec. 18, FT reported.

EU Agreed on ‘What,’ Not Yet on ‘How’

European Commission President Ursula von der Leyen said the bloc had agreed on the “what” – a reparations-loan framework – but not yet on the “how,” referring to its legal structure and risk-sharing mechanisms, according to FT.

Belgian Prime Minister Bart De Wever said his country needed “clarity on the legal basis and potential risks for the euro,” emphasizing that “a legal basis is not a luxury.” He also demanded guarantees that other member states would share responsibility if the money had to be repaid, FT wrote.

German Chancellor Friedrich Merz, who supports the €140 billion ($162 billion) plan, acknowledged that Belgium had raised “very serious questions we still need to resolve,” including potential liability for Euroclear, the media outlet reported.

Funding Delay Risks Kyiv’s 2025 Support Plans

The failure to reach consensus may delay the Commission’s target of approving new financial support for Kyiv by year-end.

Ukrainian President Volodymyr Zelensky, who attended the summit, said Ukraine would face “significant funding needs” next year, FT wrote.

“We need the money in 2026 – and better to have it at the very beginning of the year,” FT quoted Zelensky, “but I don’t know if it’s possible.”

Risk for Belgium Seems to Be Exaggerated

The EU’s proposed reparations loan plan for Ukraine poses no additional risk to Euroclear or Belgium, as their holdings would simply shift from cash to equivalently valued EU bonds, New York-based attorney Jamison Firestone said during a briefing in Kyiv.

Firestone explained the legal foundation of the EU’s plan, emphasizing that it “takes nothing from Euroclear or Russia.”

Euroclear’s obligation to Russia would remain intact, with Russia’s balance still showing €176 billion ($191 billion). The only alteration would be in the asset’s form: Euroclear would hold EU bonds instead of cash, leaving both parties’ financial positions unchanged.

At the same time, the International Monetary Fund (IMF) on Friday urged caution on the EU’s planned “reparations loan” for Ukraine, warning of “any implications for the international monetary system.”

When asked whether transferring cash from frozen Russian assets into EU-issued bonds could pose risks for European capital markets, Kammer said the decision should have solid legal grounds and not place stress on the “international monetary system.”

“We recommend when it comes to the utilization of frozen Russian assets that countries who consider doing this look for a strong legal underpinning before doing so and are also beware of any implications for the international monetary system,” he said, without specifying what those implications might be.