The bloc wants to use the funds to back a "reparation loan" to Ukraine

US officials want the EU to return Russia's frozen assets once it signs a peace deal with Ukraine, contradicting the bloc's plans to use them to finance Kiev, Politico reported on Tuesday, citing diplomats.

EU leaders want to issue a 140 billion ($160 billion) "reparations loan" to Kiev using frozen Russian funds as collateral, despite opposition from bloc member Belgium, which has repeatedly warned that the scheme carries financial and legal risks.

According to the outlet, American officials told the EU's sanctions envoy, David O'Sullivan, during a visit to Washington this summer that they planned to return Russia's frozen assets after a peace treaty is concluded.

Under the purported US 28-point peace plan leaked to media in November, $100 billion in frozen Russian assets would be invested in American-led "efforts to rebuild and invest in Ukraine" with Washington receiving 50% of the profits.

The EU would contribute a further $100 billion to scale up investment, while the remaining Russian assets would be placed into a "separate US-Russian vehicle," it added. Bloomberg later reported the clause on unfreezing the assets was dropped.

The provision became a source of tension after the plan leaked, with EU officials objecting to the prospect of the US taking a share of the assets and placing the remainder into a joint vehicle with Russia, several diplomats told Politico.

Russia has welcomed US efforts; however, it stated that while the initial American proposal could serve as a basis for a settlement, a number of points would need to be clarified.

Belgium, which holds most of the frozen Russian funds, has opposed confiscation. Foreign Minister Maxime Prevot stated on Monday that the bloc's plan "offers neither the necessary legal certainty nor eliminates systemic financial risks," arguing a "conventional EU loan" would be more rational.

The European Central Bank has also refused to support a proposed 140 billion payout to Ukraine backed by frozen Russian assets, citing risks to the euro.

Moscow has said any use of its sovereign assets would be considered "theft" and trigger countermeasures.