European leaders, including the UK, are increasingly confident that a proposal to lend Ukraine €140bn from frozen Russian assets, can be agreed by the end of the year, in a move seen as critical for Kiev to maintain its defense efforts.

The European Commission’s proposals were discussed at a meeting of G7 finance ministers in Washington last week and will also be discussed at summit of EU leaders on Thursday in Brussels. US participation remains uncertain.

THE Radoslaw Sikorski, Minister of Foreign Affairs of Poland, said last week that he believed the issue of the use of frozen Russian assets was moving toward a happy resolution. He pointed out that a deal is possible by the end of the year: “It’s very simple, either we will use the attacker’s money or we will have to use our own money. Don’t ask me what I prefer.”

Under the plan – outlined in a two-page document by the European Commission last month – the EU would grant an interest-free loan of €140 billion to Ukraine based on frozen Russian assets held at the Euroclear financial institution.

“What we are proposing is not confiscation,” a senior EU official told reporters earlier this month.

Ukraine runs an annual budget deficit as it struggles to fend off Russian invasion. In September, Ukraine estimated it would need $50 billion in external support by 2026. Specifically, EU officials believe Ukraine will urgently need funding for its war effort from April 2026, amid zero signs of progress in peace talks.

Belgium hosts €183 billion in frozen assets at Brussels-based Euroclear and has sought detailed guarantees that it will not be left alone with the bill if the plan collapses, sparking a series of legal claims. He also wants more pressure to be put on the G7 to take similar steps to help Ukraine.

Rachel Reeves, the UK Chancellor of the Exchequer, discussed the plans with her fellow G7 finance ministers in Washington this week when they met on the sidelines of the International Monetary Fund’s annual meeting. Part of the plan is for the G7 countries to work together to guarantee the debts, mainly to appease Belgium, where most of the frozen Russian central bank money is kept.

The United Kingdom that too is expected to contribute despite the fact that it holds few frozen Russian assets. Negotiations are understood to be continuing over the contributions of each G7 country to those guarantees – including whether the US will play a role.

American involvement is less certain, but the US does not hold a large amount of Russian banking assets, about $7 billion. While White House support will be considered politically and legally important, it is not necessarily financially critical.

A UK government spokesman said: “The G7 agrees that we must continue to press Putin to come to the negotiating table, as well as explore a new way of financing Ukraine’s war effort by leveraging the value of Russian state assets.”

“We continue to develop the UK’s approach and only consider options that are consistent with international law and economically and financially responsible.”

The UK and the EU are already taking profits from Russian assets and giving them to Ukraine, with the aim of getting €45bn. To date, the use of the underlying capital for Ukraine – a long-standing demand of Poland and the Baltic states – has met with resistance from France and Germany, which feared it would jeopardize the stability of the eurozone.

That dynamic changed last month when German Chancellor Friedrich Merz favored a reparations loan to finance military aid.