Moscow Retaliates at Europe's Proposal to Lend Frozen Russian Funds to Kyiv

Ukraine is depleting its financial resources to maintain its armed forces and economy afloat, after almost four years of the ongoing invasion by Moscow.

From the EU's perspective, the answer to plugging Ukraine's funding gap of €135.7bn for the coming 24 months lies in assets belonging to Russia that are frozen located within Belgian bank Euroclear, and EU leaders hope to sign that off at their meeting in Brussels next week.

Russian officials caution the EU plan would be an confiscation, and the Central Bank of Russia stated on Friday it was initiating legal action against Euroclear in a Moscow court even before a conclusive plan is made.

'Appropriate' to Use Moscow's Assets, Argue European and Ukrainian Officials

Overall, Russia has about €210bn of its funds immobilized in the EU, and €185bn of that is managed by Euroclear.

European and Ukrainian authorities contend that money should be used to rebuild what Russia has laid waste to: Brussels terms it a "reconstruction loan" and has come up with a plan to support Ukraine's economy to the tune of €90bn.

"It is appropriate that Moscow's blocked funds should be used to reconstruct what Russia has devastated – and that money then becomes ours," remarks Ukrainian President Volodymyr Zelensky.

German Chancellor Friedrich Merz argues the assets will "enable Ukraine to shield itself successfully against subsequent Russian attacks".

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

Authorities in Brussels is worried it will be burdened by an huge bill if it all backfires, and Euroclear CEO Valérie Urbain warns using the assets could "destabilise the global financial architecture".

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

Belgium's PM Bart de Wever has given Brussels a series of "pragmatic, fair, and legitimate conditions" before he will agree to the reconstruction loan scheme, and he has not excluded legal action if it "presents significant risks" for his country.

What is the EU's Proposal?

Brussels is under pressure prior to next Thursday's summit to agree on a arrangement that Belgium can agree to.

Previously the EU has avoided accessing the assets themselves directly but since last year has transferred the "excess income" from them to Ukraine. In 2024 that totaled €3.7bn. Juridically, using the profits is considered safe as Russia is under sanction and the proceeds are not Russian sovereign property.

But global military support for Ukraine has fallen significantly in 2025, and Europe has had trouble trying to compensate for the deficit caused by the US decision to all but stop funding Ukraine under President Donald Trump.

There are presently two EU options aimed at furnishing Ukraine with €90bn, to cover two-thirds of its financial requirements.

• Option one is to borrow the funds on the markets, guaranteed by the EU budget as a surety. This is Belgium's favored solution but it requires a unanimous vote by EU leaders and that would be challenging when Hungary and Slovakia object to funding Ukraine's military.
• The alternative is providing a loan of Ukraine cash from the Moscow's immobilized capital, which were at first held in bonds but have now largely been converted into cash. That money is Euroclear property located within the European Central Bank.

Brussels' executive arm recognizes Belgium has valid worries and states it is confident it has dealt with them.

The plan is for Belgium to be protected with a assurance 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.

If Russia targeted Belgium itself, any judgment by a Russian court would not be enforced in the EU.

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

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

The EU ambassadors are expected to use an emergency clause under Article 122 of the EU Treaties so the assets continue to be immobilized as long as an "direct danger to the economic security of the union" continues.

Why Belgium is Remains On Board

Belgium is insistent it remains a strong supporter of Ukraine, but perceives regulatory pitfalls in the plan and worries about being shouldering the repercussions if things go wrong.

A usually partisan political environment in this case has rallied behind Prime Minister Bart de Wever, who is being pressured from European colleagues.

"Belgium has a modest-sized economy. Belgian GDP is about €565bn – imagine if it would need to shoulder a €185bn bill," notes Veerle Colaert, academic specializing in financial regulation at KU Leuven University.

While the EU might be able to obtain sufficient guarantees for the loan itself, Belgium is concerned about an added risk of being subject to extra damages or penalties.

Prof Colaert also contends the demand for Euroclear to issue credit to the EU would contravene EU banking regulations.

"Financial institutions need to comply with capital and liquidity requirements and shouldn't put all their eggs in one basket. Now the EU is instructing Euroclear to do precisely that.

"What is the purpose of these bank rules? It's because we want banks to be solvent. And if things fail it would be up to Belgium to save Euroclear. That's another reason why it's so important for Belgium to secure ironclad assurances for Euroclear."

Europe In a Difficult Position from Every Direction

The situation is urgent, state several EU member states including those closest to Russia such as the Baltics, Finland and Poland. They argue the scheme involving immobilized capital is "a fiscally viable and practically possible solution".

"It is a decisive moment for us," says leading German conservative MP Norbert Röttgen. "Should we not succeed, I don't know what we'll do subsequently. That's why we have to finalize the deal in a week's time".

While Russia is unyielding its money should not be used, there are further worries among leaders in Europe that the US may want to use Russia's blocked funds for another purpose, as part of its own peace plan.

Zelensky has indicated 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 referred to $100bn of Russia's blocked funds being used by the US for reconstruction, with the US {taking|receiving