Russia Retaliates at the EU's Proposal to Loan Frozen Moscow's Cash to Ukraine

Kyiv remains running out of funding to sustain its military and economy afloat, after nearly four years of full-scale conflict with Russia.

For Europe, the solution to plugging Ukraine's budget hole of €135.7bn for the following biennium is found in frozen Russian assets held by Belgian bank Euroclear, and European Union officials aim to give it the green light at their meeting in Brussels next week.

Authorities in Russia state the EU plan would be an act of theft, and Russia's central bank announced on Friday it was initiating legal action against Euroclear in a Moscow court even before a conclusive plan is made.

'Just' to Use Moscow's Assets, Assert European and Ukrainian Officials

All told, Russia has about €210bn of its state reserves immobilized in the EU, and €185bn of that is managed by Euroclear.

The EU and Ukraine maintain that money should be used to restore what Russia has devastated: EU officials calls it a "reconstruction loan" and has devised a plan to support Ukraine's economy amounting to €90bn.

"It is appropriate that Moscow's blocked funds should be used to rebuild what Russia has devastated – and that that capital then becomes ours," says Ukraine's Volodymyr Zelensky.

German Chancellor Friedrich Merz states the assets will "allow Ukraine to defend itself efficiently against future Russian attacks".

Moscow's lawsuit was foreseen in Brussels. But it is not only Moscow that is unhappy.

Belgium is concerned it will be saddled with an enormous bill if it all fails, and Euroclear head Valérie Urbain warns using the assets could "destabilise the international financial system".

Euroclear also has an estimated €16-17bn immobilised in Russia.

Belgium's PM Bart de Wever has set the EU a series of "logical, sensible, and warranted conditions" before he will accept the reparations plan, and he has refused to rule out legal action if it "carries significant risks" for his country.

The Details of the EU's Plan?

European Union officials is racing against time before next Thursday's summit to agree on a solution that Belgium can agree to.

So far the EU has held off accessing the assets themselves directly but for the past year has transferred the "excess income" from them to Ukraine. In 2024 that was €3.7bn. Juridically, using the interest is considered permissible as Russia is subject to sanctions and the returns are not Russian sovereign property.

But foreign defense assistance for Ukraine has declined sharply in 2025, and Europe has had trouble trying to cover the gap left by the US decision to all but stop funding Ukraine under President Donald Trump.

There are currently two EU options designed to furnishing Ukraine with €90bn, to pay for two-thirds of its financial requirements.

• The first is to raise the money on financial markets, secured against the EU budget as a surety. This is Belgium's favored solution but it needs a unanimous vote by EU leaders and that would be problematic when Hungary and Slovakia object to funding Ukraine's military.
• This makes the other option lending Ukraine cash from the frozen Russian funds, which were initially held in financial instruments but have now largely turned into cash. That capital is owned by Euroclear deposited at the European Central Bank.

The European Commission accepts Belgium has legitimate concerns and states it is assured it has resolved them.

The scheme is for Belgium to be shielded with a assurance applying to all the €210bn of Russian assets in the EU.

If Euroclear incur losses of its own assets in Russia, the loss would be compensated from assets belonging to Russia's own clearing house which are in the EU.

In the event that Russia took legal action against Belgium itself, any decision by a Russian court would not be accepted in the EU.

In a key development, EU ambassadors are expected to agree on Friday to immobilise Russia's central bank assets held in Europe for the foreseeable future.

Heretofore they have had to vote by consensus every six months to renew the freeze, which could have meant a repeated risk to Belgium.

The EU ambassadors are set to use an extraordinary measure under Article 122 of the EU Treaties so the assets continue to be immobilized as long as an "direct danger to the financial well-being of the union" continues.

The Reasons Belgium is Not Yet Satisfied

The Belgian government is firm it remains a committed partner of Ukraine, but identifies juridical dangers in the plan and worries about being forced to deal with the consequences if things fail.

A typically fractured political scene in this case has united behind Prime Minister Bart de Wever, who is facing pressure from other European officials.

"The Belgian economy is not large. Belgian GDP is approximately €565bn – imagine if it would need to shoulder a €185bn bill," comments Veerle Colaert, academic specializing in financial regulation at KU Leuven University.

Although the EU might be able to secure sufficient guarantees for the loan itself, Belgium fears an added risk of being vulnerable to extra legal costs.

Prof Colaert also believes the stipulation for Euroclear to issue credit to the EU would breach EU banking regulations.

"Lenders need to comply with prudential rules and shouldn't put all their eggs in one basket. Now the EU is asking Euroclear to do just that.

"What is the purpose of these bank rules? It's because we want banks to be stable. And if things turn sour it would become the responsibility of Belgium to bail out Euroclear. That's a further cause why it's so important for Belgium to get absolute assurances for Euroclear."

The European Union In a Difficult Position from Every Direction

The situation is urgent, warn several EU member states including those bordering Russia such as the Baltics, Finland and Poland. They believe the scheme involving immobilized capital is "a financially feasible and politically realistic solution".

"It's a matter of destiny for us," warns leading German conservative MP Norbert Röttgen. "If the plan collapses, I don't know what we'll do subsequently. That's why we have to reach an agreement in a week's time".

While Russia is adamant its money should not be accessed, there are added concerns among European figures that the US may want to deploy Russia's frozen billions differently, as part of its own peace initiative.

Zelensky has indicated Ukraine is coordinating with Europe and the US on a recovery fund, but he is also cognizant the US has been engaging with Russia about future co-operation.

A preliminary version of the US peace plan suggested $100bn of Russia's immobilized capital being used by the US for reconstruction, with the US {taking|receiving