Moscow Retaliates at Europe's Plan to Lend Frozen Russian Assets to Kyiv

Ukraine is running out of funding to maintain its armed forces and economy, after almost four years of Russia's full-scale war.

For Europe, the remedy to filling Ukraine's financial shortfall of €135.7bn for the coming 24 months rests with Moscow's immobilized funds located within Belgian bank Euroclear, and European Union officials aim to give it the green light at their meeting in Brussels next week.

Authorities in Russia warn the EU plan would be an confiscation, and Moscow's monetary authority declared on Friday it was initiating legal action against Euroclear in a Moscow court prior to a conclusive plan is made.

'Just' to Employ Moscow's Funds, Argue Ukraine and the EU

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

The EU and Ukraine maintain that those funds should be used to restore what Russia has laid waste to: EU officials terms it a "reconstruction loan" and has come up with a plan to prop up Ukraine's economy valued at €90bn.

"It's only fair that Russia's frozen assets should be used to rebuild what Russia has destroyed – and that those funds then becomes ours," states Ukrainian President Volodymyr Zelensky.

Chancellor Friedrich Merz argues the assets will "enable Ukraine to defend itself efficiently against future Russian attacks".

Russia's court action was expected in Brussels. But it is not just Moscow that is dissatisfied.

The Belgian government is worried it will be burdened by an huge bill if it all goes wrong, and Euroclear chief executive Valérie Urbain says using the assets could "undermine the global financial architecture".

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

Belgian Prime Minister Bart de Wever has given Brussels a series of "rational, reasonable, and justified conditions" before he will accept the reparations plan, and he has refused to rule out legal action if it "presents significant risks" for his country.

Explaining the EU's Strategy?

European Union officials is working to the wire before next Thursday's summit to come up with a compromise that Belgium can accept.

Until now the EU has avoided accessing the frozen capital directly but for the past year has transferred the "windfall profits" from them to Ukraine. In 2024 that was €3.7bn. Legally, using the revenue is seen as permissible as Russia is sanctioned and the proceeds are not property of the Russian state.

But international military aid for Ukraine has declined sharply in 2025, and Europe has struggled to compensate for the gap resulting from the US decision to largely cease funding Ukraine under President Donald Trump.

There are at the moment two EU proposals seeking to providing Ukraine with €90bn, to cover a majority of its budgetary necessities.

• One is to borrow the funds on capital markets, backed by the EU budget as a surety. This is Belgium's preferred option but it demands a consensus by EU leaders and that would be problematic when Hungary and Slovakia are against funding Ukraine's military.
• That leaves loaning Ukraine cash from the frozen Russian funds, which were originally held in financial instruments but have now largely matured into cash. That capital is Euroclear property held in the European Central Bank.

Brussels' executive arm acknowledges Belgium has legitimate concerns and says it is assured it has resolved them.

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

Should Euroclear face a financial hit of its own assets in Russia, the shortfall would be covered from assets belonging to Russia's own clearing house which are in the EU.

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

In a key development, EU ambassadors are poised to endorse on Friday to permanently block Russia's central bank assets held in Europe indefinitely.

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

The EU ambassadors are planning to use an emergency clause under Article 122 of the EU Treaties so the assets stay blocked as long as an "direct danger to the economic security of the union" continues.

Why Belgium is Remains Satisfied

Belgium is insistent it remains a strong supporter of Ukraine, but sees regulatory pitfalls in the plan and is concerned about being left to handle the consequences if things do not work out.

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

"Belgium has a modest-sized economy. Belgian GDP is around €565bn – imagine if it would need to shoulder a €185bn bill," says Veerle Colaert, expert in financial law at KU Leuven University.

While the EU might be able to obtain sufficient protections for the loan itself, Belgium fears an further exposure of being exposed to extra legal costs.

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

"Banks need to comply with prudential rules and shouldn't concentrate risk. Now the EU is asking Euroclear to do just that.

"What is the purpose of these financial regulations? It's because we want banks to be solvent. And if things turn sour it would fall to Belgium to bail out Euroclear. That's an additional reason why it's so crucial for Belgium to secure water-tight assurances for Euroclear."

Europe Facing Strain from Every Direction

There is no time to lose, warn a group of EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They argue the proposal to use Russian funds is "a financially feasible and practically possible solution".

"It is a decisive moment for us," warns leading German conservative MP Norbert Röttgen. "If the plan collapses, I don't know what we'll do afterwards. That's why we have to finalize the deal in a week's time".

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

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

An early draft of the US peace plan referred to $100bn of Russia's immobilized capital being used by the US for reconstruction, with the US {taking|receiving