Russia Retaliates at the EU's Plan to Lend Frozen Moscow's Funds to Kyiv

Ukraine is depleting its cash to sustain its military and economy afloat, after nearly four years of Russia's full-scale war.

For Europe, the answer to addressing Kyiv's financial shortfall of €135.7bn for the next two years lies in Moscow's immobilized funds held by Belgian bank Euroclear, and EU leaders hope to finalize the plan at their Brussels summit next week.

Russian officials warn the EU plan would be an confiscation, and Russia's central bank stated on Friday it was taking to court Euroclear in a Moscow court even before a final decision is made.

'Only Fair' to Utilize Moscow's Funds, Assert Kyiv and Brussels

All told, Russia has approximately €210bn of its assets blocked in the EU, and €185bn of that is managed by Euroclear.

European and Ukrainian authorities maintain that that capital should be used to reconstruct what Russia has devastated: The European Commission terms it a "reconstruction loan" and has come up with a plan to support Ukraine's economy valued at €90bn.

"It's only fair that the assets frozen from Russia should be used to rebuild what Russia has destroyed – and that money then becomes Ukraine's," remarks Ukrainian President Volodymyr Zelensky.

Germany's leader Friedrich Merz argues the assets will "enable Ukraine to defend itself effectively against subsequent Russian attacks".

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

The Belgian government is concerned it will be saddled with an massive bill if it all goes wrong, and Euroclear CEO Valérie Urbain argues using the assets could "undermine the world's financial order".

Euroclear also has an roughly €16-17bn locked 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 reparations plan, and he has not excluded legal action if it "poses significant risks" for his country.

The Details of the EU's Proposal?

The EU is working to the wire prior to next Thursday's summit to come up with a compromise that Belgium can agree to.

So far the EU has held off touching the frozen capital directly but since last year has paid the "windfall profits" from them to Ukraine. In 2024 that totaled €3.7bn. From a legal standpoint, using the interest is deemed safe as Russia is subject to sanctions and the proceeds are not Russian sovereign property.

But international military aid for Ukraine has slipped dramatically in 2025, and Europe has found it difficult to cover the shortfall left by the US decision to virtually halt funding Ukraine under President Donald Trump.

There are presently two EU proposals seeking to furnishing Ukraine with €90bn, to pay for a large portion of its funding needs.

• Option one is to borrow the funds on the markets, guaranteed by the EU budget as a collateral. This is Belgium's first choice but it requires a agreement by all by EU leaders and that would be problematic when Budapest and Bratislava object to funding Ukraine's military.
• That leaves providing a loan of Ukraine cash from the Russian assets, which were initially held in securities but have now predominantly been converted into cash. That capital is owned by Euroclear deposited at the European Central Bank.

The EU's executive acknowledges Belgium has valid worries and says it is confident it has dealt with them.

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

Should 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.

If Russia took legal action against Belgium itself, any decision by a Russian court would not be recognized in the EU.

As an important step, EU ambassadors are expected to agree on Friday to freeze indefinitely Russia's central bank assets held in Europe indefinitely.

Previously they have had to vote unanimously every six months to continue the freeze, which could have meant a repeated risk to Belgium.

The EU ambassadors are expected to use an special provision under Article 122 of the EU Treaties so the assets stay blocked as long as an "immediate threat to the economic security of the union" continues.

Why Belgium is Still Not Satisfied

Belgium is insistent it remains a staunch ally of Ukraine, but sees legal risks in the plan and worries about being shouldering the repercussions if things fail.

A normally partisan political environment in this case has come together in support of Prime Minister Bart de Wever, who is facing pressure from European colleagues.

"Belgium is a small economy. Belgian GDP is around €565bn – imagine if it would need to shoulder a €185bn bill," notes Veerle Colaert, professor of financial law at KU Leuven University.

While the EU might be able to secure sufficient assurances for the loan itself, Belgium worries about an added risk of being vulnerable to extra fines or liabilities.

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

"Lenders need to follow capital and liquidity requirements and shouldn't put all their eggs in one basket. Now the EU is instructing Euroclear to do exactly that.

"What is the purpose of these banking laws? It's because we want banks to be stable. And if things fail it would fall to Belgium to bail out Euroclear. That's another reason why it's so vital for Belgium to obtain water-tight protections for Euroclear."

The European Union Under Pressure from All Sides

Time is of the essence, warn several EU member states including those closest to Russia such as the Baltics, Finland and Poland. They maintain the scheme involving immobilized capital is "the most financially feasible and politically achievable solution".

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

Although Russia is unyielding its money should not be used, there are further worries among EU officials that the US may want to deploy Russia's immobilized billions differently, as part of its own peace plan.

Zelensky has stated Ukraine is in discussions with Europe and the US on a reconstruction fund, but he is also mindful the US has been holding discussions with Russia about potential collaboration.

An early draft of the US peace plan mentioned $100bn of Russia's frozen assets being used by the US for reconstruction, with the US {taking|receiving