With Trump apparently pulling out of Ukraine, EU is now on its own. In the EU, this new reality is slowly sinking in. It therefore has to stand up to the challenge and take over the financing of the Ukraine war.

That is easier said than done. For radicalised European governments as in Denmark and the Baltic countries, this is not an insurmountable problem. However, for several other European governments it is actually a serious problem, as they are already struggling with budget deficits and an increasingly discontented population. Think France, Germany and the UK. It will therefore be difficult, unless the money can be found somewhere else. It is increasingly likely that this will be by confiscating the Russian Central Bank’s frozen reserves in the EU, which are estimated at USD 250 billion.

The EU has already dug into this treasure chest in 2024 by confiscating the interests generated by these reserves to guarantee the repayment of a Euro 45 billion loan to Ukraine. The intention now is to keep digging. This has legal consequences as it is against international law, including the 2004 UN Convention on 'Jurisdictional Immunities of States and their Property'. To overcome this, the EU is planning an innovative legal work-around¹⁾ instead of out-right confiscation (but with the same result).

Not all EU countries agree, however. Most of the Russian funds are deposited in Euroclear, located in Belgium, so the Belgians are worried about the consequences for the future of Euroclear and legal consequences in case of Russian litigation, and the Belgian PM has even stated that this will never happen. But as Belgium is a small country, I guess EU can force them to accept. However, the reputational risk for the EU is broader, and it may lead big creditors as China and Saudi Arabia to reconsider their deposits in Europe (and the UK). The EU commission and the European Central Bank are against, as it ‘contravenes the assets’ sovereign immunity and potentially threatens global financial stability’, and so are France and Germany (even if Germany seems to be changing its stance). On the other hand, the radicalised governments of the Nordic and Baltic countries, Poland and several Eastern European countries are delighted. This is politics, many EU countries are squeezed financially, and they are in a hurry, so legality and reputational risks don’t weigh much. Desperate times require desperate measures. The deal may therefore eventually be done.

EU leaders have reacted differently to the message from Trump that EU must take over the responsibility for Ukraine. The EU ‘Foreign Minister’ Kaja Kallas has pessimistically said that this is not possible. She insists the US should not pull out. On the photo from Wikimedia the two EU iron ladies Ursula von der Leyen and Kaja Kallas.

If we assume that the deal is eventually done, it would solve the challenge of financing the Ukrainian war for the next 2-3 years. This must therefore be the planning horizon for the EU.

However, one thing is money, another is the battle field. Here it doesn’t look that good for the Ukrainian Government and its EU and NATO backers. If we look at how the war unfolds presently, Russia is advancing everywhere on the front, even if slowly. 12 % of Donbas and 25% of Zaporozhia and Kherson are still controlled by Ukraine. At this slow pace, it may take the Russian army another year of fighting before the Ukrainian Army is driven out of these provinces, which is their stated aim (and which inspired Trump to call Russia a ‘paper tiger’).

The most serious problem for the Ukrainian nationalists is as always manpower. Many men have been killed and wounded, others have deserted, left the country or gone into hiding. It is difficult to get reliable numbers on this, but the number of men unwilling to be drafted and sent to the front appears to be very high. Only a quarter of Ukrainians want to fight Russia to the end, according to a recent poll.

Assuming that EU has taken over the responsibility for the Ukraine war and found a way to finance it, how does it expect it to end? There we are kept in the dark. I haven’t seen any strategic analysis from the EU in this sense. It states that it will continue the solidarity with Ukraine, supporting it financially and punishing Russia, but this is not a strategy, it is an open-ended commitment. Like Biden’s ‘as long as it takes’.

In the lack of a formulated EU strategy let me try my own interpretation of it.

Firstly, the official EU line is that Russia must be stopped in Ukraine, as Russia otherwise will attack and try to conquer the rest of Europe. Like Hitler.

Secondly, taking into account the threat from Russia, Europe needs to rearm dramatically. And fast. Not only with defensive, but also with offensive weapons. Negotiating with Russia is not worth it. Russia only understands brute force. Diplomacy will lead nowhere.

Thirdly, by continuing the support to Ukraine, the war can keep Russia busy, while EU rearms, which will take 3-4 years. If there are not Ukrainians enough willing to fight, foreign fighters must be brought in as voluntaries or mercenaries (for example from Colombia), so the war can be kept going without directly involving troops from EU countries The military support to Ukraine to slow the Russian army down will continue. This is a waiting game. The Ukrainian army may be pushed back, but Russian advances won’t be quick. Time is on EU’s side, not Russia’s.

Fourthly, in 3 to 4 years time the EU will have rearmed and there will be a new president in the US, hopefully Biden-style. Not the present vice-president, God forbid. Then a war can be fought with Russia, which by some miracle will be limited to conventional weapons. And here the EU will win and bring Russia to its knees.

If this is a correct interpretation of the EU thinking, an end to the war in Ukraine is years away.

And what if the EU thinking is based on unrealistic assumptions? Many things can happen, which could lead to failure.

Firstly, the key question is whether the population in Ukraine is willing to continue the war for 3-4 more years. Will the Ukrainians’ unwillingness to go to the trenches ultimately lead to massive civilian disobedience, or even into open insurrection? Perhaps not. But it can’t be discarded.

Secondly, will the Zelensky regime start cracking from within? There are signs of increasing dissatisfaction with his increasingly authoritarian leadership style, including within his own party. On the other hand, Zelensky and his grey eminence Yermak seem to have an iron grip on the power. An intent to carry out a Palace Coup or a Maidan-style uprising will probably be quelled with a military iron fist.

Andriy Yermak, by many considered the Grey Eminence in Ukraine wielding the real power in the country. Wikimedia

Thirdly, will the Ukrainian military, despite the financial support from the EU and unlimited US weaponry, weaken to a point where they will be driven Westwards much faster than now? This is a crucial question, which I think few have a good answer to.

Fourthly, Ukraine and EU sceptic parties may come to power in some core EU countries (and perhaps even in the UK) and this may force a change in the EU Ukraine policy.

If the EU strategy (or whatever it should be called) eventually fails, the cost for the Ukrainian government will be high. Apart from expending the lives and health of additional tens or hundreds of thousands of unwilling Ukrainians, an eventual peace agreement will probably lead to increased territorial losses. Then we may not be talking about four provinces any more, but possibly about the old Russian cities of Odessa and Kharkov as well. Furthermore, as EU is taking on an increasing military dimension (with or without NATO), Russia may change its mind on Ukraine EU membership.

The EU’s support to Ukraine looks increasingly as the support the rope provides to the hanged man.

Poor Ukrainians.

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1) The legal work-around presently being considered is to take the frozen funds and give them to Ukraine (in tranches) to continue the war and substitute them with zero coupon bonds (no interests, no amortisation) emitted by the EU or the EU countries. This means that the money formally is not confiscated, ‘just’ substituted with EU paper money. However, to get the money back, Russia has to make war reparation payments to Ukraine, when the war is over. The interesting thing is that this means that the EU will have to pay for the reconstruction in Ukraine, as they have already spent the Russian funds on the war. So it may look smart, but it implies that EU (or the EU countries), already heavily in debt, will have to take on an additional (real) debt burden, when the war is over. They are simply postponing the cost of financing the war, using other people’s money (without their consent), the same money they themselves had earmarked for reconstruction. I think only EU bureaucrats could invent such a twisted scheme. It lets them escape the immediate squeeze they are in and postpone the day of reckoning. To this comes the loss of reputation as reliable financial partners.

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I have commented on the Ukraine conflict since 2014. Click on the links below to read.

September 2025: As expected, Trump couldn’t end the war in Ukraine. What now?

January 2025: Why Trump may not end the war in Ukraine

October 2024: All wars eventually end. So will the Ukraine war.

August 2024: The President in his labyrinth

July 2024: How to perpetuate slaughterhouse Ukraine.

February 2024: It is now it is becoming dangerous

October 2023: Just wondering: Who is it exactly that is being strategically defeated in Ukraine?

July 2023: What are the Ukrainians dying for?

May 2023: And what if Ukraine loses the war?

January 2023: Oh, what a lovely war!

April 2022: Seems NATO did decide to throw Ukraine under the bus

December 2021: Has NATO decided to sacrifice Ukraine?

November 2021: How to conserve the peace in Europa

September 2014: Will sanctions hurt Russia?

April 2014: Does the EU know what it is doing in Ukraine?