During her 2025 State of the Union address to the European Parliament, European Commission President Ursula von der Leyen unveiled a new initiative aimed at boosting Ukraine’s drone production using funds derived from frozen Russian assets.
The move signals a growing Western effort to match Ukraine’s ingenuity with industrial scale in the ongoing drone conflict.
EU-Ukraine Drone Alliance
Von der Leyen announced that the EU will provide an advance loan of €6 billion under the ERA (European “Reparations/ERA Loans”) mechanism. This will help establish what she calls a Drone Alliance with Ukraine, specifically to scale up drone production.
She emphasized that Ukrainian drones have already caused massive damage to Russian equipment, accounting for over two-thirds of Russian losses in certain estimates. But she cautioned that Russia is rapidly catching up by utilizing mass-produced drones, particularly the Iranian-developed “Shahed” models. Without scaling up, Ukraine faces the risk of falling behind in terms of volume.
The statement reflects a shift in how the EU thinks about using frozen Russian assets. Instead of just holding them or using interest, Europe is now frontloading support—making credit available now, to be repaid later (once reparations or income from those assets are fully realized).
“There is no doubt: Europe’s eastern flank keeps all of Europe safe, from the Baltic Sea to the Black Sea,” said Von der Leyen, unveiling a new project she named Eastern Flank Watch.
The announcement comes alongside growing concern that Russian drone strikes and missile attacks are increasing in scale and frequency. Ukraine’s air defenses are being tested continuously. Late or vague Western responses may encourage Moscow to continue striking civilian infrastructure, including energy facilities and government buildings.
Risks, Open Questions & Challenges
Though EU’s ambitious plan for Ukraine, several aspects of the plan remain unclear:
- The exact mechanism for getting the €6 billion to Ukraine is still being defined. Will this be a direct EU budget disbursement or a loan via intermediaries? How quickly can funds be mobilized?
- Legal and political hurdles around frozen Russian assets remain sensitive, especially regarding full confiscation. Many EU countries are more comfortable using interest or profits from these assets rather than the underlying capital.
- Producing large numbers of drones at scale requires supply chains, manufacturing infrastructure, and security against sabotage—and all of this must be established under wartime pressures. Ukraine has shown ingenuity, but scaling it up will not be trivial.
Leveraging Frozen Russian Assets
Von der Leyen’s announcement signals a growing recognition in Brussels that innovation alone is not enough—and that Ukraine’s lead in drone warfare must be solidified through industrial backing.
It also illustrates how the EU is increasingly willing to use its frozen Russian assets not only as a tool of financial pressure but also as a source of support in the here and now.
The EU has roughly €210 billion in Russian Central Bank assets immobilized within its borders. These frozen funds generate interest and investment returns that typically yield €2.5 to €3 billion annually.
Ukraine will only be expected to repay this loan once it receives Russian reparations, according to Von der Leyen’s plan. Europe has already provided €170 billion in military and financial aid to Kyiv.
In effect, this may mark a turning point: from reactive support to building long-term capability. Whether the EU and Ukraine can move fast enough to make this Drone Alliance real could shape the effectiveness of Ukraine’s defense in the coming months—and whichever side holds the skies may hold the battlefield.
