The Russian money would be used to finance a EU 'reparation loan' to Ukraine which would only have to be paid back when Russia would pay war reparations to Ukraine. That at least was the official pronunciation which turned out to be a quite obvious fake.

A look into the details left many question which no one had answered:

Why would this scheme, as [German Chancellor] Merz say, 'require budgetary guarantees from member states'? Doesn't that mean that the tax-payers of those member state will eventually have to pay it? Who's money is at risk when Russia wins its litigation? Who pays if something goes wrong?

Russia will of course never pay reparations to Ukraine. Nor would the loan be spend on repair or rebuild things in Ukraine. Instead the money would be used to buy weapons from Europe to continue the war for another two years.

The whole idea was a scam. Merz or others did no say so directly but in the end it would obviously be EU taxpayers who have to pay for the 'loan'.

Earlier this week a Financial Times column confirmed (archived) my interpretation of the deal:

This week, EU leaders will discuss a "reparation loan" to Ukraine, tied to Russia's obligation to pay for the devastation President Vladimir Putin has wrought.
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Around €140bn would be lent to Kyiv and only repaid out of any reparations from Moscow. Without them, the EU as the lender would not get its money back. The EU would itself fund the loan by requiring Euroclear, the Belgian securities depository where most of Russia's hard-currency reserves are blocked, to lend it cash built up as sanctioned Russian investments have matured. In return, Brussels would post what amounts to an IOU, backed by member states and later the next EU budget.

The plan suffers from contradictions. The proposal does not actually touch Russia's assets, in spite of efforts to depict it as making Moscow pay. In fact, it explicitly rules out changing Russia's legal claims. It is only an EU private financial institution (Euroclear) that will be strong-armed here — although other G7 countries are looking for ways to join in, and Brussels is hinting that more European banks with some Russian assets could be added.