Envoys try to narrow gaps on a loan plan for Ukraine ahead of Thursday's crunch EU summit

BRUSSELS — European Union envoys worked on Tuesday to narrow gaps on a plan to use billions of dollars in frozen Russian assets as collateral for a massive loan to cover Ukraine's economic and military needs over the next two years, ahead of a crunch summit of EU leaders later this week.

Almost four years into Russia's full-scale war on Ukraine, the leaders have committed to funding Kyiv's needs, which the International Monetary Fund puts at 135 billion euros ($157 billion). Ukraine is desperate to secure the money by early 2026.

''We do not have the luxury of time,'' Sweden's EU Affairs Minister Jessica Rosencrantz told reporters in Brussels. ''It is really time to move forward with a decision, and Sweden is willing to share the risk because the cost and risk of doing nothing is greater.''

Such a move has never been made before, and it comes with risks. The European Central Bank has warned that if Europeans appear willing to grab other countries' money, it could undermine confidence in the euro currency. Some member nations are also concerned about inviting retaliation from Russia.

Belgium, where most of the assets are held, is the main opponent of the plan. It fears that Russia will strike back, either through the courts or in more nefarious ways.

European Council President António Costa, who will chair Thursday's summit, has insisted that the leaders should not leave EU headquarters in Brussels until they have reached a decision, even if it takes days.

A deep freeze, and two options

Then last Friday, the EU placed an indefinite freeze on the assets — estimated to total around 210 billion euros ($247 billion) — to ensure that Hungary and Slovakia, both with Moscow-friendly governments, can't prevent the billions of euros from being used to support Ukraine.

It also ensures that the assets can't be used by the United States or Russia in any Ukraine peace negotiations without European approval.

Two plans for using the money have emerged. The first would be a ''reparations loan'' that would use the Russian assets until Moscow agrees to pay for the damage inflicted on Ukraine. Few think Putin will ever agree to pay reparations.

Plan B would be for the EU to borrow the money on financial markets, much as the bloc did to fund a massive loan plan to revive European economies after the coronavirus pandemic. But many of Europe's major economies are cash-strapped and mired in debt.

The assets make up a substantial pot of potentially ready-to-use cash. The vast majority — around 193 billion euros ($227 billion) at the end of September — are held in the Belgian financial clearinghouse known as Euroclear.

Over the last year, Hungary has blocked EU support for Ukraine at almost every turn. The government in Slovakia is starting to dig in its heels as well. Avoiding a veto is in the interest of the vast majority of member countries.

Details of the reparations loan

European Commission President Ursula von der Leyen has said the EU would cover two-thirds of Ukraine's needs for 2026 and 2027, for a total loan of 90 billion euros ($105 billion). International partners would fill the gap.

Due to EU sanctions on Russia's assets, cash balances have accumulated at Euroclear. Under the new plan, some of the cash would be transferred to an EU debt instrument. Ukraine would owe the EU the money but would repay only after the bloc's sanctions are lifted and after Russia agrees to pay war reparations.

The commission insists that there is no ''theft,'' as Russia has claimed, because the right of the Russian Central Bank to make a claim on its money and Euroclear's duty to repay will remain intact.

Opposition in Belgium

Importantly for Belgium, the plan contains safeguards to ensure that the risks would be shared by its partners. Other EU countries would offer to guarantee the loan if something went wrong. Germany has already signaled that it would do so, as Sweden did on Tuesday.

But the Belgian government has not been assuaged. Even before the commission's reparations loan plan was made public, the government warned of ''consequential economic, financial and legal risks,'' and said it felt that EU partners were not listening to its concerns.

Euroclear has not ruled out legal action of its own, should the EU oblige it to transfer the Russian assets.

But Ukrainian President Volodymyr Zelenskyy agrees that a reparations loan would be ''a game-changer. Why? Because it is a security guarantee for Ukraine — a financial security guarantee.'' Ukraine, he said, would be free to use the money on its economy, infrastructure or armed forces, depending on how the war goes.