BRUSSELS — Hungary formally ruled out issuing eurobonds to support Ukraine on Friday, a move that robs the EU of a potential Plan B should it fail to find a way to use frozen Russian state assets to finance a €165 billion loan to Kyiv.

The European Commission wants the 27 EU member countries to agree at a summit later this month to support Kyiv’s faltering economy with a loan based on immobilized Russian central bank reserves. Belgium is pushing back hard as it holds the lion’s share of that frozen cash and fears it would be on the hook if the Kremlin sues.

Eurobonds would have provided an alternative funding stream to Ukraine, but Budapest rejected the idea of issuing joint debt backed by the EU’s seven-year budget, two diplomats at a meeting of ambassadors told POLITICO.

Hungary’s rejection came hours before a dinner between German Chancellor Friedrich Merz and Belgian Prime Minister Bart De Wever in Brussels to discuss the loan.

Merz said he was planning to use the event to bring De Wever on board.

“I take the concerns and objections of the Belgian prime minister very seriously,” Merz told reporters on Thursday night. “I don’t want to persuade him, I want to convince him that the path we  are proposing here is the right one.”

Germany is offering a backstop on 25 percent of the funds to convince Belgium to send the frozen billions to Ukraine, but De Wever wants a broader guarantee from the whole EU that Belgium will be insured for the full amount, or more.

The Commission proposed eurobonds on Wednesday as one of two options, along with the Russian asset-backed loan, to ensure that Ukraine’s war chest doesn’t run bare as soon as next April.

Raising debt through the EU budget to prop up Ukraine requires a unanimous vote, however. Hungary’s rejection now raises the stakes for what are expected to be intense negotiations on the loan before EU leaders gather in Brussels on Dec. 18.

Officials did not expect an immediate breakthrough given De Wever’s strong opposition.

The Commission has repeatedly downplayed the financial and legal risks associated with the reparation loan and insists its proposal addresses most of Belgium’s concerns.

The proposed reparations loan earmarks €115 billion to finance Ukraine’s defense industry over five years, while €50 billion would go to cover Kyiv’s budgetary needs.

James Angelos contributed reporting from Berlin.