For the past four and a half years, the war on Europe’s doorstep has haunted policymakers. However, they have treated it as an imminent threat rather than one that is already eroding the very foundations on which Europe stands. Russia’s war has devastated much of southern and eastern Ukraine, even as the front lines have shifted only slowly. For Europe, however, the challenge has never been limited to the battlefield. Supporting Ukraine and limiting Russia have tested the continent’s economic resources and political unity. Now, as US President Donald Trump seeks to force a deal disadvantageous to kyiv and repeatedly threatens to withdraw American support, Europe faces the prospect of further bearing that burden alone. Even if the latest crisis is averted, Europe can no longer assume that Washington will guarantee its security. It must develop the financial capacity to sustain Ukraine’s defense, the industrial strength to defend itself, and the economic influence to constrain Moscow. To meet these challenges, Europe must build a war economy. The past four years offer lessons on how Europe can finance such an effort, but also warnings about the divisions that could undermine it. The European Union has already been at the forefront of Ukraine’s recent financing, moving from a €18.1 billion ($21 billion) share of the G7’s $50 billion Extraordinary Revenue Acceleration (ERA) loans in 2024 to finalizing a new €90 billion ($100 billion) loan in April, without commitment from the United States. However, internal divisions persist on numerous issues, particularly when it comes to constraining Russia. This month, the EU adopted the largest round of sanctions lists to date. But while the measures added a record number of designations, they did little to expand the scope of restricted activity and did not accelerate the phasing out of Russian energy imports, with pipeline gas imports still allowed through the fall of 2027. European leaders have also expressed concern about Trump’s decision to forgo new Russia-related sanctions as he seeks to deal with the costs his foreign policy has generated. However, the war between the United States and Israel against Iran has shown, if anything, that Europe’s measures against Russian hydrocarbons could have gone further. Before February, about 20 million barrels per day (bpd) of crude oil and petroleum products and about 110 billion cubic meters (bcm) per year of liquefied natural gas (LNG) passed through the Strait of Hormuz. By comparison, Russia exported about 6.5 million bpd of oil and products in September, and about 43 billion bpd of LNG last year, about a third of Hormuz’s oil and two-fifths of its LNG. As the crisis continues and Trump seeks additional Russian supplies, Europe must complement its efforts to constrain Moscow with greater investment in its own security. The first and most important step is to establish a permanent framework for joint EU borrowing, not only to finance the continued defense of Ukraine, but also to finance the defense industry that Europe will need to sustain its own defense and, if necessary, prevail against future threats from Russia. Crisis breeds innovation, as demonstrated during the COVID-19 pandemic, when EU member states overcame their long-standing aversion to mutualized loans, creating the €750 billion NextGenerationEU recovery fund in 2020. The EU’s contribution to ERA loans and this year’s €90 billion credit line, both funded by common EU loans, extended that logic to wartime financing. But these remain improvisations crisis after crisis. Deepening the union of fiscal and capital markets and building a true fiscal-military state would lay the foundations of Europe’s power and its ability to deter and win wars. The same logic applies today in the United States, where deep capital markets have given companies like SpaceX, which invested heavily for years before seeing returns, the space to develop technologies like its Starlink network that have reshaped modern warfare. The importance of this technology is now keenly felt on the battlefields of Ukraine, where kyiv’s communications have depended on a network subject to the whims of one man, SpaceX CEO Elon Musk. Europe therefore needs the fiscal capacity to finance its own technological development and acquisitions. There are understandable concerns about the existing indebtedness of European states such as France and the United Kingdom. However, Russia’s frozen sovereign assets offer a potential way to support further borrowing. Divisions remain over the use of these assets, and Belgium, which is home to most of Euroclear, opposes such a move for fear of Russian legal action and damage to its position in the global financial system. The bloc must unite to share that risk, which in any case is exaggerated. Nor should all EU fiscal support come in the form of direct joint debt. Greatly expanding the EU capital markets union and creating tax-advantaged structures across the region for defense companies and technology innovators can be even more effective. Beyond the assets themselves, Europe must also take greater control over its continuing economic ties with Russia. This means intervening much more actively in cases like that of Austria’s Raiffeisen Bank. In 2025, following a Russian court ruling, more than €2.1 billion was withdrawn from Raiffeisen’s Russian subsidiary to compensate Rasperia, a company linked to sanctioned oligarch Oleg Deripaska. A Vienna court ruling last month now paves the way for Raiffeisen to seek compensation for Rasperia’s frozen assets in the EU, using the same sanctions relief through which Euroclear freed up some $3 billion in 2025. It is precisely this kind of legalized deal with Moscow that keeps threats like those directed at Belgium credible: whether the Kremlin can seize European assets and trigger the release of frozen Russia-linked assets In the EU, each expropriation becomes a negotiation. chip.In addition, the UK and EU have increasingly used anti-circumvention measures that share some characteristics with US secondary sanctions. Europe should now be more assertive in making clear that companies that help Russia evade its sanctions risk losing access to European financial systems and markets. American companies will choose Europe over the Kremlin, even if Trump waives more sanctions. Finally, Europe should seek to reduce the influence of the United States over its foreign and security relations. Speaking in Qatar this week, the US ambassador to Turkiye, Tom Barrack, said Washington was walking away from its decades-old security agreement for Gulf oil. Europe may not be able to offer the same level of security, but it can offer a mutually beneficial partnership that addresses the concerns of both sides. And it is Europe that is now stepping up in the Gulf, with the UK and France deploying aircraft, air defenses and refueling support to help Saudi Arabia against Houthi attacks. Unlike Washington, Europe can promise a deeper partnership in the future and serve as a reliable buyer of Gulf oil and gas exports in exchange for Gulf states doing more to address Europe’s security concerns about Russia through greater compliance with sanctions and, above all, ending the Kremlin’s role in OPEC plus. Europe has the means to finance its own security. Now you must find the will to borrow. The views expressed in this article are those of the author and do not necessarily reflect the editorial position of Al Jazeera.
