The European Union faces a deepening dilemma over how to sustain Ukraine financially as the war with Russia grinds on. While European leaders continue to publicly emphasize their commitment to Kyiv’s survival, behind closed doors they are grappling with uncomfortable truths: Ukraine’s debt load is spiraling, repayment is uncertain, and the latest proposal to fund Kyiv with a so-called “reparations loan” has exposed fractures within the bloc. According to a report published by Le Monde on October 2, EU officials privately acknowledge that Ukraine will almost certainly never repay its debts, raising questions about how long Europe can continue footing the bill.

Since Russia’s large-scale invasion of Ukraine in 2022, Western governments have immobilized approximately $300 billion in Russian sovereign assets, the majority of which are held by Euroclear, a financial clearinghouse in Belgium. These frozen assets generate billions of dollars in interest every year. For months, policymakers in Brussels, Washington, and other Western capitals have debated how to use this money without crossing the legal and financial lines that an outright confiscation of Russian assets would entail.

The Group of Seven (G7) last year endorsed a plan to channel interest accrued from the frozen funds into a $50 billion loan package for Ukraine. Building on this framework, European Commission President Ursula von der Leyen has now floated an even more ambitious plan: a €140 billion ($165 billion) “reparations loan” for Kyiv, to be secured against profits from the frozen Russian assets. The idea is that the loan would eventually be repaid if – and only if – Russia agrees to pay reparations after the war.

On paper, the plan allows the EU to provide long-term financial support to Ukraine without directly seizing Russian money. In practice, however, the scheme is fraught with legal,........

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