Moscow Retaliates at Europe's Proposal to Lend Immobilized Russian Cash to Kyiv

Ukraine is running out of funding to keep going its military and economy afloat, after close to 48 months of full-scale conflict with Russia.

For Europe, the remedy to filling Ukraine's funding gap of €135.7bn for the following biennium rests with frozen Russian assets located within Belgian bank Euroclear, and EU leaders hope to give it the green light at their Brussels summit next week.

Moscow's representatives warn the EU plan would be an confiscation, and Russia's central bank declared on Friday it was taking to court Euroclear in a Moscow court even before a definitive agreement is made.

'Just' to Use Russia's Assets, Say Ukraine and the EU

Overall, Russia has approximately €210bn of its state reserves frozen in the EU, and €185bn of that is managed by Euroclear.

European and Ukrainian authorities argue that money should be used to reconstruct what Russia has destroyed: EU officials refers to it as a "loan for reparations" and has devised a plan to prop up Ukraine's economy amounting to €90bn.

"It's only fair that Russia's frozen assets should be used to rebuild what Russia has devastated – and that that capital then becomes Ukraine's," says Ukrainian President Volodymyr Zelensky.

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

The legal move by Moscow was anticipated in Brussels. But it is not just Moscow that is dissatisfied.

Authorities in Brussels is concerned it will be left with an huge bill if it all backfires, and Euroclear CEO Valérie Urbain argues using the assets could "disrupt the world's financial order".

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

Belgium's PM Bart de Wever has set the EU a series of "pragmatic, fair, and legitimate conditions" before he will endorse the reconstruction loan scheme, and he has refused to rule out legal action if it "poses significant risks" for his country.

Explaining the EU's Plan?

European Union officials is working to the wire ahead of next Thursday's summit to agree on a arrangement that Belgium can support.

So far the EU has avoided using the assets themselves directly but starting in 2024 has paid the "extraordinary revenues" from them to Ukraine. In 2024 that was €3.7bn. From a legal standpoint, using the profits is deemed permissible as Russia is under sanction and the earnings are not property of the Russian state.

But global military support for Ukraine has fallen significantly in 2025, and Europe has struggled to compensate for the gap resulting from the US decision to virtually halt funding Ukraine under President Donald Trump.

There are presently two EU proposals aimed at providing Ukraine with €90bn, to finance a large portion of its funding needs.

• Option one is to secure the capital on financial markets, backed by the EU budget as a collateral. This is Belgium's first choice but it needs a agreement by all by EU leaders and that would be problematic when two member states oppose funding Ukraine's military.
• The alternative is loaning Ukraine cash from the frozen Russian funds, which were at first held in financial instruments but have now largely matured into cash. That capital is owned by Euroclear located within the European Central Bank.

Brussels' executive arm recognizes Belgium has legitimate concerns and claims it is assured it has dealt with them.

The plan is for Belgium to be safeguarded with a guarantee encompassing all the €210bn of Russian assets in the EU.

Should Euroclear face a financial hit of its own assets in Russia, the loss would be compensated from assets belonging to Russia's own settlement agency which are in the EU.

In the event that Russia targeted Belgium itself, any ruling by a Russian court would not be recognized in the EU.

In a key development, EU ambassadors are poised to endorse on Friday to freeze indefinitely Russia's central bank assets held in Europe for the foreseeable future.

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

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

Why Belgium is Remains On Board

Belgium is firm it remains a staunch ally of Ukraine, but identifies regulatory pitfalls in the plan and worries about being forced to deal with the consequences if things do not work out.

A normally partisan political environment in this case has rallied behind Prime Minister Bart de Wever, who is under pressure from other European officials.

"Belgium is a small economy. Belgian GDP is about €565bn – imagine if it would need to carry a €185bn bill," comments Veerle Colaert, academic specializing in financial regulation at KU Leuven University.

Although the EU might be able to arrange enough assurances for the loan itself, Belgium is concerned about an additional danger of being vulnerable to extra legal costs.

Prof Colaert also believes the demand for Euroclear to grant a loan to the EU would contravene EU banking regulations.

"Financial institutions need to follow capital and liquidity requirements and shouldn't concentrate risk. Now the EU is telling Euroclear to do precisely that.

"What is the purpose of these financial regulations? It's because we want banks to be stable. And if things turn sour it would fall to Belgium to bail out Euroclear. That's a further cause why it's so crucial for Belgium to get ironclad protections for Euroclear."

The European Union In a Difficult Position from All Sides

There is no time to lose, state several EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They believe the frozen assets plan is "the most economically realistic and practically possible solution".

"This is a crucial test for us," says leading German conservative MP Norbert Röttgen. "If we fail, I don't know what we'll do subsequently. That's why we have to succeed in a week's time".

Although Russia is unyielding its money should not be accessed, there are additional apprehensions among European figures that the US may want to deploy Russia's blocked funds for another purpose, as part of its own peace initiative.

Zelensky has indicated Ukraine is coordinating with Europe and the US on a rebuilding fund, but he is also mindful the US has been engaging with Russia about potential collaboration.

An initial document of the US peace plan suggested $100bn of Russia's blocked funds being used by the US for reconstruction, with the US {taking|receiving