The EU is edging closer to a political decision to use frozen Russian assets to finance Ukraine’s reconstruction, as allies warn that interest earnings from the funds will not be enough to sustain Kyiv’s economy if the war continues into 2027, reported Ukraine Business News.

Ukraine is expected to require about $65bn in annual support by that year, according to European officials, who say using Russia’s immobilised assets remains the only viable option amid the United States’ reduced financial support. EU leaders have debated for months whether to confiscate or leverage the roughly €300bn in frozen Russian state assets held in Europe, wary of setting a precedent that could unsettle global financial norms.

Danish Prime Minister Mette Frederiksen said the bloc is now “much closer” to a political consensus on granting Ukraine a €140bn reparations loan backed by Russian assets. “We must at some stage adopt a formal decision on the loan,” she said. German Chancellor Friedrich Merz added that the issue will be finalised at the European Council meeting on October 23-24.

The shift in tone comes amid growing concern over Russia’s renewed military provocations near Nato borders and President Vladimir Putin’s refusal to halt hostilities. Western diplomats say these actions have hardened European attitudes toward Moscow and accelerated discussions on asset transfers.

At the same time, the EU extended sanctions related to Russian hybrid threats for another year but failed to agree on the creation of a “drone wall” or its 19th sanctions package. The Council renewed individual restrictions on those responsible for destabilising activities abroad and expanded measures adopted in October 2024.

Security tensions have mounted across Europe, with unidentified drones spotted over a Belgian military base in Elsenborn and at Munich Airport last week, prompting temporary flight suspensions. Denmark also reported repeated Russian naval provocations in the straits linking the Baltic and North Seas.

Despite these incidents, EU countries remain divided on new defence measures. Eastern members back the proposed drone wall, citing mounting airspace breaches, while others argue it would be costly and risk excessive EU influence over national defence. The latest sanctions package has also stalled due to Austria’s insistence that certain Russian assets be unfrozen to compensate Raiffeisen Bank for penalties imposed by Moscow – a demand many states reject, warning it could legitimise Russia’s seizure of Western property and trigger reciprocal asset claims.