Russia Retaliates at the EU's Proposal to Loan Frozen Moscow's Cash to Kyiv

Ukraine is facing a severe shortage of funding to sustain its armed forces and economy afloat, after nearly four years of the ongoing invasion by Moscow.

In the view of European leaders, the answer to plugging Kyiv's financial shortfall of €135.7bn for the following biennium lies in assets belonging to Russia that are frozen sitting in Belgian bank Euroclear, and European Union officials aim to give it the green light at their meeting in Brussels next week.

Moscow's representatives state the EU plan would be an act of theft, and the Central Bank of Russia stated on Friday it was initiating legal action against Euroclear in a Moscow court ahead of a conclusive plan is made.

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

All told, Russia has approximately €210bn of its state reserves frozen in the EU, and €185bn of that is held by Euroclear.

Brussels and Kyiv contend that that capital should be used to rebuild what Russia has destroyed: Brussels calls it a "reparations loan" and has devised 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 those funds then becomes ours," states Ukrainian President Volodymyr Zelensky.

Chancellor Friedrich Merz says the assets will "help Ukraine to shield itself successfully against any future Russian attacks".

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

The Belgian government is anxious it will be saddled with an huge bill if it all backfires, and Euroclear CEO Valérie Urbain argues using the assets could "destabilise the global financial architecture".

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

The leader of Belgium Bart de Wever has set the EU a series of "pragmatic, fair, and legitimate conditions" before he will accept the reconstruction loan scheme, and he has not excluded legal action if it "carries significant risks" for his country.

What is the EU's Strategy?

European Union officials is working to the wire prior to next Thursday's summit to finalize a arrangement that Belgium can support.

So far the EU has held off accessing the assets themselves directly but since last year has transferred the "excess income" from them to Ukraine. In 2024 that was €3.7bn. Juridically, using the revenue is considered less risky as Russia is sanctioned and the earnings are not Moscow's sovereign assets.

But global military support for Ukraine has slipped dramatically in 2025, and Europe has had trouble trying to compensate for the gap resulting from the US decision to all but stop funding Ukraine under President Donald Trump.

There are currently two EU options seeking to supplying Ukraine with €90bn, to finance a majority of its financial requirements.

• One is to raise the money on financial markets, backed by the EU budget as a surety. This is Belgium's favored solution but it demands a agreement by all by EU leaders and that would be challenging when Hungary and Slovakia object to funding Ukraine's military.
• That leaves lending Ukraine cash from the Moscow's immobilized capital, which were at first held in securities but have now predominantly matured into cash. That capital is Euroclear property deposited at the European Central Bank.

Brussels' executive arm acknowledges Belgium has justified fears and states it is confident it has resolved them.

The plan is for Belgium to be protected with a insurance applying to 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 clearing house which are in the EU.

In the event that Russia went after Belgium itself, any ruling by a Russian court would not be accepted 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.

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 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.

Why Belgium is Remains On Board

Belgium is adamant it remains a strong supporter of Ukraine, but identifies juridical dangers in the plan and worries about being left to handle the consequences if things fail.

A normally divided political landscape in this case has united behind Prime Minister Bart de Wever, who is being pressured from fellow EU leaders.

"Belgium is a small economy. Belgian GDP is around €565bn – imagine if it would need to carry a €185bn bill," notes Veerle Colaert, academic specializing in financial regulation at KU Leuven University.

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

Prof Colaert also contends the demand for Euroclear to grant a loan to the EU would violate 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 telling 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 go wrong it would be up to Belgium to bail out Euroclear. That's a further cause why it's so important for Belgium to obtain absolute assurances for Euroclear."

Europe In a Difficult Position from Multiple Fronts

There is no time to lose, caution several EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They maintain the frozen assets plan is "a fiscally viable and politically realistic solution".

"It's a matter of destiny for us," states 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 reach an agreement in a week's time".

While Russia is insistent its money should not be used, there are additional apprehensions among EU officials that the US may want to use Russia's frozen billions differently, as part of its own diplomatic proposal.

Zelensky has stated Ukraine is working with Europe and the US on a rebuilding fund, but he is also aware the US has been talking to Russia about future co-operation.

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