A new peace plan, primarily promoted by the United States, has thrown the European Union's strategy to utilize Russia's immobilised assets to assist Ukraine into significant disarray. This US-led proposal suggests that Russian assets, estimated at around €300 billion across G7 jurisdictions, would be unblocked and converted into an investment platform managed by Washington, implying commercial benefit for the Kremlin rather than liability for war damages.

This US initiative, which has been presented to Kyiv for negotiations, directly contradicts the EU's long-standing objective to make Russia pay for the destruction caused by the war and to issue a reparations loan to support Ukraine's financial and military needs. Ukrainian President Volodymyr Zelenskyy articulated his country's precarious position, stating that Ukraine faces "a very difficult choice: either loss of dignity, or the risk of losing a key partner" in reference to the United States. The Trump administration is reportedly pushing an aggressive timeline, aiming for an agreement by the end of next week.

The 28-point blueprint, reportedly drafted without European input and negotiated directly with Moscow through envoys like Kirill Dmitriev and Steve Witkoff, outlines several contentious provisions. Key among them is the allocation of frozen assets: Point 14 proposes that $100 billion in frozen Russian assets be invested in US-led efforts for Ukraine's reconstruction, with the US receiving 50% of the profits. Europe would be expected to add another $100 billion, and remaining Russian funds would be channelled into a separate US-Russian investment vehicle for "joint projects in specific areas," aiming to foster stronger relations and provide an incentive against future conflict. This arrangement would allow Moscow a lucrative post-war deal.

Territorially, the plan suggests significant concessions from Ukraine. It proposes that Crimea, Luhansk, and Donetsk be recognized as "de facto Russian" by the US and others. Ukrainian forces would withdraw from the part of Donetsk Oblast they currently control, establishing a neutral demilitarized buffer zone internationally recognized as Russian territory. The front lines in Kherson and Zaporizhzhia would be frozen, with Russia relinquishing other occupied areas. However, Ukraine's "red lines" explicitly reject any recognition of temporarily occupied territory as Russian or any limits on its rights to self-defense or the size/capabilities of its armed forces.

Regarding Ukraine's military and future alliances, the plan proposes limiting the Ukrainian Armed Forces to 600,000 personnel (down from an estimated 880,000 active personnel). Ukraine would agree to enshrine in its constitution that it will not join NATO, and NATO would correspondingly include a provision in its statutes that Ukraine will not be admitted in the future, nor will NATO station troops in Ukraine. European fighter jets would be stationed in Poland, and Ukraine would commit to being a non-nuclear state.

Initially, security guarantees were vague, but later versions of the draft, delivered to Kyiv, include "unprecedented NATO-style security guarantees." These pledges would commit Western allies to treat any future "significant, deliberate, and sustained armed attack" by Russia on Ukraine as an attack on the entire 'transatlantic community,' triggering a coordinated military response for a period of 10 years, with possible renewal. However, these guarantees come with conditions: they would be void if Ukraine invades Russia or launches missiles at Moscow or St. Petersburg without cause. Ukraine's top negotiator, Rustem Umerov, has reiterated that Kyiv will not accept proposals that violate its "red lines," which include its sovereign right to choose alliances.

The plan also details provisions for Russia's reintegration into the global economy, including a staged lifting of sanctions and an invitation for Russia to rejoin the G8. An American-Russian working group on security issues would be established, and Russia would enshrine in law its policy of non-aggression. Other points include the extension of nuclear non-proliferation treaties, IAEA supervision of the Zaporizhzhia Nuclear Power Plant with electricity distributed equally, and educational programs promoting understanding and eliminating prejudice, specifically addressing the rights of Ukrainian and Russian media and education, and prohibiting Nazi ideology.

Ukraine is also pressed to hold elections within 100 days, despite martial law. A full amnesty would be granted to all parties involved in the conflict. President Zelenskyy, while acknowledging the US effort, stated he would propose "alternatives" to a plan widely seen as demanding capitulation. He warned that Ukraine faces "a lot of pressure... to weaken us, to make divide us" in the coming week.

The EU's internal debate over its reparations loan strategy is intensified by the US plan. Belgium, hosting Euroclear which holds €185 billion of Russian assets, demands airtight guarantees against Moscow's retaliation. Slovakia opposes military aid to Kyiv via the loan, and Hungary is firmly against the entire project. While Germany, Poland, the Nordics, and the Baltics strongly favor the loan, countries like France and Italy remain undecided, considering alternative options such as bilateral contributions or common EU borrowing. There are significant concerns within the EU about the legal uncertainties and potential "knock-on effects" on the eurozone if financial markets perceive asset utilization as confiscation.

EU officials, notably European Commission President Ursula von der Leyen, have emphasized the principle of "nothing about Ukraine without Ukraine," highlighting that Europeans were not consulted in the drafting of the US plan. The plan is widely viewed by European officials as "heavily tilted towards Vladimir Putin," risking the derailment of the EU's strategy and leaving the bloc powerless, despite holding the bulk of Russian assets. The momentum towards a peace deal is building amidst Russia's continued military advances, economic pressures, and Ukraine's domestic challenges, including a corruption scandal and manpower crisis. The US has threatened to cut intelligence sharing and weapons supplies to compel Ukraine's agreement.