Russia Hits Back at the EU's Plan to Lend Frozen Moscow's Funds to Ukraine

Kyiv remains depleting its financial resources to maintain its military and economy afloat, after close to 48 months of full-scale conflict with Russia.

In the view of European leaders, the remedy to addressing Kyiv's budget hole of €135.7bn for the coming 24 months lies in assets belonging to Russia that are frozen held by Belgian bank Euroclear, and EU leaders hope to sign that off at their Brussels summit next week.

Authorities in Russia warn the EU plan would be an act of theft, and Russia's central bank announced on Friday it was initiating legal action against Euroclear in a Moscow court prior to a conclusive plan is made.

'Appropriate' to Use Russia's Funds, Argue Ukraine and the EU

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

The EU and Ukraine contend that those funds should be used to reconstruct what Russia has destroyed: Brussels refers to it as a "loan for reparations" and has come up with a plan to support Ukraine's economy to the tune of €90bn.

"It's only fair that Moscow's blocked funds should be used to rebuild what Russia has destroyed – and that that capital then becomes ours," remarks Ukrainian President Volodymyr Zelensky.

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

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

Belgium is anxious it will be saddled with an huge bill if it all goes wrong, and Euroclear CEO Valérie Urbain warns using the assets could "destabilise the world's financial order".

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

The leader of Belgium Bart de Wever has given Brussels a series of "rational, reasonable, and justified conditions" before he will agree to the reparations plan, and he has left open the possibility of legal action if it "presents significant risks" for his country.

The Details of the EU's Strategy?

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

So far the EU has avoided using the assets themselves directly but since last year has transferred the "excess income" from them to Ukraine. In 2024 that was €3.7bn. Legally, using the interest is considered less risky as Russia is subject to sanctions and the returns are not Russian sovereign property.

But global military support for Ukraine has slipped dramatically in 2025, and Europe has struggled to make up the deficit left by the US decision to all but stop funding Ukraine under President Donald Trump.

There are at the moment two EU options aimed at supplying Ukraine with €90bn, to pay for a large portion of its financial requirements.

• The first is to borrow the funds on financial markets, guaranteed by the EU budget as a collateral. This is Belgium's favored solution but it requires a agreement by all by EU leaders and that would be difficult when Budapest and Bratislava oppose 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 securities but have now mostly turned into cash. That capital is Euroclear property deposited at the European Central Bank.

The EU's executive accepts Belgium has valid worries and says it is convinced 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.

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

In a significant move, EU ambassadors are expected to agree on Friday to permanently block 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 ongoing risk to Belgium.

The EU ambassadors are planning to use an special provision under Article 122 of the EU Treaties so the assets continue to be immobilized as long as an "clear risk to the economic interests of the union" continues.

The Reasons Belgium is Remains On Board

The Belgian government is adamant it remains a committed partner of Ukraine, but sees juridical dangers in the plan and worries about being shouldering the repercussions if things fail.

A usually divided political landscape in this case has rallied behind Prime Minister Bart de Wever, who is under pressure from other European officials.

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

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

Prof Colaert also argues the stipulation for Euroclear to issue credit 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 asking Euroclear to do exactly that.

"Why do we have these financial regulations? It's because we want banks to be secure. And if things turn sour it would become the responsibility of Belgium to rescue Euroclear. That's an additional reason why it's so important for Belgium to get ironclad assurances for Euroclear."

Europe Under Pressure from Every Direction

The situation is urgent, warn a group of EU member states including those bordering Russia such as the Baltics, Finland and Poland. They maintain the proposal to use Russian funds is "a financially feasible and politically realistic solution".

"It is a decisive moment for us," states 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 finalize the deal in a week's time".

Although Russia is insistent its money should not be touched, there are further worries among EU officials that the US may want to employ Russia's immobilized billions in another way, as part of its own peace plan.

Zelensky has stated Ukraine is coordinating with Europe and the US on a rebuilding fund, but he is also cognizant the US has been talking to Russia about potential collaboration.

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