BRUSSELS — The European Commission is proposing a reparations loan of €165 billion for Ukraine using the cash value of frozen Russian state assets held in Belgium, according to documents obtained by POLITICO.

The reparations loan is part of a wider financial package, worth up to €210 billion, to keep Kyiv’s finances afloat for the coming years.

The €165 billion reparations loan includes €25 billion of immobilized Russian state assets held in private bank accounts across the bloc, in addition to €140 billion held in the Euroclear bank in Belgium. Ukraine’s war chest is set to run bare in April.

The legal proposal will serve as a basis for immediate technical negotiations before EU leaders meet in mid-December to decide on the most sensitive parts of the initiative. Ukraine would only have to repay the loan if Russia ends the conflict and pays war reparations, which is seen as an unlikely scenario. 

Within the reparations loan, €115 billion has been earmarked to finance Ukraine’s defense industry, while €50 billion will cover Kyiv’s budgetary needs. The remaining €45 billion of the package will be used to repay a G7 loan to Ukraine from 2024.

The main stumbling block remains the Belgian government’s opposition to the loan.

“The text the Commission will table today does not address our concerns in a satisfactory manner,”  Belgian Foreign Minister Maxime Prévot told reporters on Wednesday morning on the margins of a NATO meeting.”We have the frustrating feeling of not having been heard.”

Belgium fears Russian retaliation against the state and the financial depository holding the frozen assets, Euroclear. The government is demanding financial guarantees from EU capitals if Moscow successfully recovers the money.  

The Commission has signaled its readiness to provide emergency bridge financing to Ukraine to cover its needs for the first months of the year, likely through EU debt.