Moscow Hits Back at Europe's Plan to Loan Frozen Russian Funds to Ukraine

Kyiv remains running out of funding to maintain its military and economy, after almost four years of Russia's full-scale war.

From the EU's perspective, the remedy to plugging Kyiv's budget hole of €135.7bn for the next two years rests with frozen Russian assets sitting in Belgian bank Euroclear, and EU leaders aim to finalize the plan at their meeting in Brussels next week.

Authorities in Russia warn the EU plan would be an illegal seizure, and the Central Bank of Russia declared on Friday it was initiating legal action against Euroclear in a Moscow court even before a final decision is made.

'Just' to Utilize Russia's Funds, Argue European and Ukrainian Officials

In total, Russia has roughly €210bn of its funds blocked in the EU, and €185bn of that is in the custody of Euroclear.

The EU and Ukraine maintain that that capital should be used to rebuild what Russia has devastated: Brussels calls it a "reparations loan" and has come up with a plan to bolster Ukraine's economy to the tune of €90bn.

"It's only fair that Russia's frozen assets should be used to reconstruct what Russia has devastated – and that money then becomes ours," remarks Ukraine's Volodymyr Zelensky.

Chancellor Friedrich Merz states the assets will "help Ukraine to defend itself effectively against future Russian attacks".

Moscow's lawsuit was expected in Brussels. But it is not only Moscow that is concerned.

The Belgian government is worried it will be saddled with an huge bill if it all backfires, and Euroclear CEO Valérie Urbain warns using the assets could "undermine the world's financial order".

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

Belgian Prime Minister Bart de Wever has given Brussels a series of "pragmatic, fair, and legitimate conditions" before he will endorse the reconstruction loan scheme, and he has not excluded legal action if it "presents significant risks" for his country.

Explaining the EU's Strategy?

The EU is racing against time before next Thursday's summit to come up with a arrangement that Belgium can agree to.

So far the EU has avoided touching the frozen capital directly but for the past year has paid the "windfall profits" from them to Ukraine. In 2024 that totaled €3.7bn. Juridically, using the revenue is seen as less risky as Russia is under sanction and the earnings are not Russian sovereign property.

But international military aid for Ukraine has slipped dramatically in 2025, and Europe has had trouble trying to make up the shortfall caused by the US decision to all but stop funding Ukraine under President Donald Trump.

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

• One is to borrow the funds on the markets, guaranteed by the EU budget as a surety. This is Belgium's first choice but it requires a unanimous vote by EU leaders and that would be difficult when Hungary and Slovakia oppose funding Ukraine's military.
• The alternative is lending Ukraine cash from the Russian assets, which were at first held in securities but have now predominantly turned into cash. That capital is an asset of Euroclear located within the European Central Bank.

The European Commission accepts Belgium has justified fears and says it is assured it has dealt with them.

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

If 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 went after Belgium itself, any ruling by a Russian court would not be recognized in the EU.

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

Heretofore 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 remain frozen as long as an "clear risk to the economic interests of the union" continues.

The Reasons Belgium is Remains Convinced

The Belgian government is adamant it remains a staunch ally of Ukraine, but sees legal risks in the plan and worries about being left to handle the consequences if things fail.

A typically partisan political environment in this case has united behind Prime Minister Bart de Wever, who is under pressure from fellow EU leaders.

"The Belgian economy is not large. Belgian GDP is around €565bn – think about if it would need to bear a €185bn bill," says Veerle Colaert, expert in financial law at KU Leuven University.

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

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

"Banks need to adhere to prudential rules and shouldn't put all their eggs in one basket. Now the EU is telling Euroclear to do just that.

"What is the purpose of these banking laws? It's because we want banks to be solvent. And if things fail it would be up to Belgium to bail out Euroclear. That's an additional reason why it's so crucial for Belgium to secure absolute guarantees for Euroclear."

The European Union Under Pressure from All Sides

The situation is urgent, caution a group of EU member states including those bordering Russia such as the Baltics, Finland and Poland. They maintain 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 next. That's why we have to reach an agreement in a week's time".

While Russia is insistent its money should not be touched, there are added concerns among leaders in Europe that the US may want to employ Russia's frozen billions differently, as part of its own peace initiative.

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

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