European Commission President Ursula von der Leyen announced that part of the so-called "reparation loan" without interest should be used to "strengthen our own defence industry".
According to Politico, discussions among top EU officials are quickly moving to the question of what to do with the roughly €140 billion in frozen Russian assets. The top priority, according to EU officials, is to allow Ukraine to buy weapons - and especially European-made ones.
Until recently, European leaders were more inclined to allow Kiev to draw only the interest on these funds. But now the trend has reversed. Politicians increasingly support the option of Ukraine directly financing military purchases from European companies through a "reparation loan".
"We need a more structural solution to military support. That's why I proposed the idea of a reparations loan based on frozen Russian assets," said von der Leyen during her joint address with European Council President Mark Rutte. "We will strengthen our defence industry by using part of the credit for purchases in and with Europe."
According to the Financial Times, German Chancellor Friedrich Merz's idea that Ukraine should spend money exclusively on EU-made weapons has gained support across the EU. "If Ukraine loses the war, there will be nothing to rebuild," said a European diplomat.
While France points to legal complications, Elysee Palace officials say they support the idea of directing the loan towards European arms production. Similarly, Sweden and Finland, in a joint letter, called for the money to be used to strengthen European security and integrate Ukraine into European defence cooperation.
Reuters recalled that the initiative is also a response to the cooling relations with the United States, where President Donald Trump is calling on Europe to rely more on itself. This reinforces the belief in Brussels that the EU must take a more active role in defence.
However, not everyone is in favour of the military direction of the loan. Some countries are pushing for Kiev to have full discretion in the use of funds. "Ideally, it would be budget support, with Ukraine deciding how to use it," a senior EU diplomat told Politico.
The frozen funds are now deposited with the European Central Bank and managed by the Belgian institution Euroclear. The key issue remains the legal basis for their use. According to experts, such as Armin von Bogdandy of the Max Planck Institute, the EU could use qualified majority voting in an emergency situation to override a possible veto by Hungary or Slovakia.
Reuters reports that the finance ministers will return to the matter at a meeting in Luxembourg on 10 October. In the meantime, they will discuss the technical parameters of this "creative" financial instrument, which could mark a major shift in European defence and aid to Ukraine.
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