EU finance ministers met in Copenhagen on September 20 to discuss tapping the cash pile of frozen Central Bank of Russia (CBR) money and using it to make a large Reparation Loans to Ukraine, but no final decision has been reached.

An estimated €170bn of a total of €230bn of frozen Russian-owned securities held at Euroclear in Belgium has already matured and is now sitting as a cash pile the EU is hoping to tap. In addition most of the EU share of a G7 $50bn loan to Ukraine, approved in June last year at a G7 summit in Italy, has already been disbursed, also using the profits from the frozen assets. That leaves around €130bn that the EU could use for the Reparation Loans that will be issued in the form of zero-coupon bonds, guaranteed on a voluntary basis by EU member states.

This is the second time the EU leaders have discussed the idea of issuing bonds. The topic was also on the agenda at another meeting of foreign ministers in Copenhagen at the start of this month, but rejected due to the legal and reputational risks.

The use of bonds will allow the EU to claim that it has not seized the underlying assets, which remain the property of Russia. The bonds also allowed all individual states to choose to participate, avoiding Hungary’s veto on any action by the European Commission (EC) itself.

The foreign ministers are still discussing the details as they would like to broaden the scheme to include the G7 members to spread the risk of guaranteeing the bonds further.

The White House has also been approached, but has yet to comment. Earlier the Trump administration said that Europe should simply seize the money. The US has already put laws in place that allowed it to confiscate the $5bn of Russian assets that were in the US banking system.

Ukraine would only have to repay the loans once Russia pays compensation after the war.

The Northwest EU members have all been behind the scheme from the start, but more recently Germany and Spain have signalled support. They are impatient with delay and want Brussels to start using the cash as the cost of supporting Ukraine without US help begins to weigh on European economies. Europe can’t afford to take over the burden of supporting Ukraine, as most EU countries are either in recession or approaching a crisis.

Separately, the UK says it is prepared to carry out a similar scheme of the €25bn that has been frozen in Britain. The UK’s finance minister, Rachel Reeves, presented the controversial plan, which is designed to mirror the European plan, to the EU finance ministers in Copenhagen on September 20, but also did not announce specific details. However, she insisted the loans would be in line with international law and would not involve permanently confiscating Russian state assets, Politico reports.

Critics of the scheme say that even the bond scheme is tantamount to confiscation of sovereign assets, which remains unprecedented. Russia is certain to launch numerous lawsuits which will likely take decades to resolve. Likewise, Euroclear is afraid of civil lawsuits brought by investors on the grounds of damage done to their investments. European banks also want government reassurances on the assumption that a confiscation would lead to a flight from the euro that could destabilise the financial system.

“Absconding with the sovereign assets of a major economy, such as Russia's, will collapse the international trade and banking system. The blowback on the U.S., Europe and #Ukraine will be catastrophic,” economics professor at Columbia University Jeffrey Sachs.