EU Delays Decision on Ukraine’s €23bn Budget Gap and Frozen Russian Assets

The pause is not simply a question of finding another tranche of money. It puts pressure on the legal and institutional architecture through which the EU has tried to finance Ukraine while avoiding confrontation over Russia’s frozen sovereign reserves.

On September 11, Commission spokesman Balázs Ujvári said Brussels remained committed to releasing the first €45bn tranche of the €90bn Ukraine Support Loan agreed by EU governments in April. However, the Commission will not begin political or legal discussions on additional funding sources until its technical assessment of Ukraine’s fiscal position is complete - even though the existing two-year package covers only about two-thirds of Ukraine’s overall financial needs for 2026 and 2027.

The immediate issue is therefore not whether Europe supports Ukraine. It is whether the mechanisms designed for supporting Ukraine remain adequate for a war whose costs are moving faster than those mechanisms.

The limits of the €90bn framework

The €90bn loan was designed as a substantial two-year financial anchor, with €45bn allocated to each year. Its size was already intended to provide Ukraine with a predictable source of macro-financial support.

The new military deficit has changed the equation.

Ukraine's reported $27bn, or roughly €23–25bn, gap is concentrated in the defence budget. That makes the problem materially different from an ordinary fiscal shortfall. A financing gap in military spending can translate directly into pressure on weapons procurement and defence capabilities.

Kyiv has consequently asked partners for an additional €23bn. Yet Brussels is first requiring a more detailed assessment of the underlying fiscal position rather than immediately opening negotiations over another funding instrument.

That decision reflects the constraints of the existing framework. The EU can commit large sums through loans backed by its own budget, but such instruments do not automatically expand when the cost of the war rises. A package designed around one assessment of Ukraine's needs can become insufficient when military expenditure increases.

The problem is particularly acute because the additional requirement is not marginal. It is large enough to expose the difference between a financing mechanism calibrated for macroeconomic stability and the much more volatile requirements of a prolonged war of attrition.

Why Brussels is pressing pause

The consultations held on September 7 by Commission Vice-President Valdis Dombrovskis - first with Ukrainian Prime Minister Serhii Koretskyi and later with IMF Managing Director Kristalina Georgieva - point to a process in which Brussels is trying to establish the size and nature of the gap before committing itself to a new solution.

The Commission has also tied the release of the €45bn 2026 tranche to the completion of fiscal and structural requirements. Ukraine must meet agreed macroeconomic targets, maintain progress on anti-corruption measures and advance public administration reform, with structural milestones due by November 1.

That creates a peculiar imbalance. Kyiv faces an immediate military financing problem, while the European funding mechanism remains conditional on a broader assessment of fiscal and institutional performance.

For Brussels, however, the audit serves another purpose: it determines whether the additional requirement can be absorbed within existing instruments or whether Europe must confront the politically harder question of where genuinely new money should come from.

The Commission's refusal to discuss those new sources before the technical work is completed effectively postpones the most consequential decision.

That decision concerns Russia's frozen assets.

Euroclear has become a European problem

More than $210bn of Russian central bank assets are immobilised in the EU. Around €180–185bn of that amount is held through Belgium-based Euroclear.

The EU has so far stopped short of confiscating the principal. During 2024 and 2025, it agreed to use extraordinary profits generated by the immobilised assets instead.

The renewed funding pressure is now pushing the issue back towards the centre of the European debate.

More than 120 members of the European Parliament have called for a legal mechanism to move towards the use of the frozen Russian funds. But the central obstacle has never been simply political support for Ukraine. It is the distribution of legal and financial exposure if the principal is actually transferred or confiscated.

Belgium has resisted assuming that exposure alone.

Prime Minister Bart De Wever and Foreign Minister Maxime Prévot have warned against measures that could leave Belgium and Euroclear facing Russian legal claims and potential financial consequences. Their position creates a problem for the EU as a whole: the assets are physically concentrated in one jurisdiction, while the political objective of using them is shared across the bloc.

That is where the idea of a European custodian enters the debate.

The proposal to spread the risk

The proposed model would move the Russian sovereign assets from Belgian jurisdiction into a specialised institution operating at EU level.

Its significance is less about the mechanics of custody than about who would carry the consequences.

Under the current arrangement, Belgium and Euroclear are unusually exposed because of where the assets are held. A European-level custodian would seek to turn that national exposure into a collective European liability, with the EU itself becoming the principal legal counterparty.

The attraction is obvious. Belgium would no longer be asked to absorb alone the consequences of a decision taken in the name of European policy.

But the proposal also reveals the underlying institutional problem. The EU has extensive financial capacity, yet national governments remain exposed to legal risks that can arise from decisions taken collectively. There is no established mechanism capable of automatically converting those risks into a shared liability across all 27 member states.

The disagreement is therefore not simply about whether frozen Russian assets should be used. It is about whether the EU is institutionally capable of acting as one financial and legal actor when the consequences of doing so are unevenly distributed.

That is a much harder question.

From financial assistance to geopolitical risk-sharing

The Ukraine funding dispute is exposing a structural tension in European policy.

The EU's financial architecture has traditionally relied on rules designed to protect fiscal stability, sovereign assets and legal predictability. The war in Ukraine creates incentives in the opposite direction. It demands rapid mobilisation of resources, acceptance of unusual financial risks and mechanisms capable of shifting costs across national borders.

The Russian assets sit directly at that intersection.

Their continued immobilisation avoids the most radical legal step, but it does not resolve the political problem created by Ukraine's financing needs. The longer the war continues and the larger the funding requirements become, the more difficult it is to treat the assets merely as a legal question separate from European security policy.

Yet Brussels cannot simply bypass the objections of the member state bearing the greatest immediate exposure.

That is why the custodian proposal matters even before it becomes legislation. It represents an attempt to redesign the allocation of risk rather than merely search for a new source of cash.

The European Commission has so far stopped short of presenting the necessary legislative package. It is waiting for the IMF's calculations, the completion of the fiscal review and Ukraine's fulfilment of the required structural milestones.

The deadline of November 1 therefore carries significance beyond the release of €45bn. It is becoming a point at which several unresolved questions converge: the size of Ukraine's actual financing requirement, the capacity of existing EU instruments, the IMF's assessment and the political feasibility of using Russian sovereign assets.

If the additional €23bn cannot be covered through existing arrangements, the choice becomes increasingly difficult to postpone. Europe can either continue expanding conventional loans and other established mechanisms, or accept that sustaining Ukraine's defence requires a new approach to the sovereign assets of the state responsible for the war.