It’s Crunch Time For Europe Which Decides Whether To Confiscate Russian Assets

By Elwin de Groot and Bas van Geffen, strategists at Rabobank

Is today crunch-time for the EU? That is the billion dollar question. European leaders are meeting in Brussels for a two‑day European Council summit. Their agenda covers a range of topics, including a ‘strategic debate’ on the EU’s Multiannual Financial Framework for 2028-2034, EU enlargement, migration, the Mercosur deal that risks being delayed (or cancelled?) again, preparation of the European defence roadmap, and geo-economic strategy through a review of competitiveness.

These are all important topics. But without a doubt, the question of funding Ukraine is the toughest nut to crack. Europe remains committed to this support, as Russia’s Putin showed little willingness to compromise in his speech yesterday: He said that Russia will not back down from its mission to “liberate its historic lands” and that the “European swine” backing Ukraine would ultimately lose power.

The EU’s goal is still to grant a €90-140  billion loan to Ukraine to support its economy and military through 2026–27, backed by frozen assets from the Russian central bank that are held mostly in Euroclear (Belgium). But Belgium has stressed legal and financial liabilities concerns. The country has proposed a joint-EU loan instead. 

“We want to finance the war for much longer to end it as quickly as possible” https://t.co/Vdy69Tfnyj pic.twitter.com/R6826XwP30

— Arnaud Bertrand (@RnaudBertrand) December 18, 2025

As a first step towards using the frozen assets, the EU decided last week –by qualified majority– to replace the six-month renewal cycle with and open-ended freeze of those assets. This provision ensures the funds cannot be reclaimed by Russia due to vetoes from Hungary or Slovakia.

But the next step proves to be more difficult. The White House has been dialing up pressure on EU governments to block the plan, arguing that tapping these assets might prolong the war and reduce the chance of reaching a peace agreement. Indeed, US diplomats have warned that Russian lawsuits, such as the one already filed against Euroclear, could trigger repayment obligations, potentially to the US.

In any case, German Chancellor Merz has now thrown his full weight in this discussion, backing the frozen assets plan and trying to force a decision. Yesterday he told parliament that “It is about aid for Ukraine, but it is also about sending a clear signal to Russia that we will use the assets that are available here to help end this war as quickly as possible.”

That is perhaps Merz’ style. But he also may be emboldened by the fact that German lawmakers approved a record list of arms and military equipment purchases yesterday, worth around €50 billion, taking the total amount approved this year to nearly €83 billion. As those orders land on military equipment maker’s desks, this should provide a significant boost to German industry the coming year.

There have been quite some critical remarks on the effectiveness of the German spending plans, such as from the German Council of Economic Experts, but there can be little doubt that next year should see a significant fiscal impulse. And this is clearly a factor that has weighed on German Bunds in recent months, with the 10y yield –at 2.86% yesterday– within a whisker of this year’s high.