EU officials are debating the so-called “reparations loan” of about €140 billion ($162 billion) to Ukraine that would be guaranteed by Russian assets immobilized by the West after the escalation of the Ukraine conflict in 2022.

According to the proposal, Kiev would repay only if Moscow covers damages incurred by the conflict. Moscow has repeatedly condemned Western efforts to use its frozen funds to aid Ukraine, calling the move “theft.”

Although the EU has not yet agreed on the plan, Politico said “friction is already growing over whether to attach conditions to the loan”. One idea – which is being pushed by France and, to a lesser extent, Germany and Italy – is to ensure money “flows back as much as possible into the EU’s defense sector — and not across the Atlantic.”

According to Politico, this pressure led to draft summit conclusions emphasizing “the importance of reinforcing the European defense industry” with the loan. However, tensions are expected to sharpen at an EU leaders’ meeting in Brussels on Thursday, the report added.

Critics quoted by Politico argue that such limits “smack of hypocrisy.”

“If the aim is to keep Ukraine in the fight, you need to keep the criteria open,” a senior EU diplomat told the paper.

One particular concern is that the “Buy European clause” could block Kiev from buying crucial American weapons, including US-made Patriot air defense systems that the bloc does not produce.

Bloomberg reported this week that Washington will not join the EU-led initiative, citing concerns the move could unsettle global markets. Western officials have also for months warned that outright confiscation of frozen Russian assets – estimated at around $300 billion – would be illegal and undermine the West’s credibility.

Russian President Vladimir Putin has stated that “those who are smarter” in the West oppose seizing Russian assets while warning that Western moves to confiscate the funds would not go unpunished.