German Chancellor Friedrich Merz has called on the European Union to unlock frozen Russian assets to provide Ukraine with a €140 billion interest-free loan aimed at ensuring the country’s long-term military resilience.
In an article for the Financial Times, Merz outlined a plan that he described as a decisive signal of Europe’s strength in the face of Moscow’s war of aggression.
A Shift in Germany’s Position
The proposal is a major shift from Berlin’s earlier skepticism about tapping frozen Russian reserves. Merz argued that the loan would not violate property rights, since repayment would only occur after Russia pays reparations to Ukraine.
By tying the funds directly to future compensation, the mechanism would transform Russia’s own assets into a resource for Ukraine’s defense.
The chancellor emphasized that Ukraine must exclusively use the money for military procurement, not for covering its general budget. He added that Kyiv and EU governments should jointly make procurement decisions to strengthen both Ukraine’s defense and Europe’s security.
Financing Mechanism and Legal Framework
Merz stated that EU member states would initially guarantee the loan, and the next long-term EU budget cycle (2028 onward) would later back it. Such an arrangement, he argued, would distribute the risk while creating a legally defensible structure to bypass accusations of unlawful expropriation.
The frozen Russian assets—mostly European, American, and British government bonds held by the Euroclear depository in Belgium—amount to nearly €200 billion. Until now, Brussels has limited itself to using only the annual windfall profits generated by these holdings. Merz’s proposal, however, would tap directly into the underlying capital, unlocking resources on a much larger scale.
Strategic Impact
Merz emphasized that the initiative would both stabilize Ukraine militarily for years and provide a boost to the European defense industry, advancing EU sovereignty and the collective security of the Union. He emphasized that Europe needed to apply effective leverage to disrupt the Russian president’s cynical game of waiting.
Brussels has been considering legal options for months, and Merz’s proposal is likely to intensify the EU’s debate. Any decision will require at least majority approval among member states, though opposition from Hungary and Slovakia, whose leaders are known for Kremlin-friendly stances, could complicate the process.
