Moscow Hits Back at the EU's Proposal to Loan Frozen Russian Funds to Ukraine

Ukraine is running out of funding to maintain its armed forces and economy, after close to 48 months of full-scale conflict with Russia.

In the view of European leaders, the answer to plugging Kyiv's financial shortfall of €135.7bn for the coming 24 months rests with frozen Russian assets sitting in Belgian bank Euroclear, and EU leaders hope to finalize the plan at their Brussels summit next week.

Russian officials warn the EU plan would be an illegal seizure, and Russia's central bank stated on Friday it was initiating legal action against Euroclear in a Moscow court even before a final decision is made.

'Only Fair' to Utilize Russia's Assets, Assert Kyiv and Brussels

All told, Russia has about €210bn of its state reserves immobilized in the EU, and €185bn of that is managed by Euroclear.

European and Ukrainian authorities maintain that that capital should be used to restore what Russia has destroyed: EU officials calls it a "loan for reparations" and has proposed a plan to bolster Ukraine's economy to the tune of €90bn.

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

Germany's leader Friedrich Merz states the assets will "allow Ukraine to shield itself efficiently against future Russian attacks".

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

The Belgian government is anxious it will be saddled with an enormous bill if it all goes wrong, and Euroclear chief executive Valérie Urbain warns using the assets could "destabilise the international financial system".

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

Belgium's PM Bart de Wever has given Brussels a series of "rational, reasonable, and justified conditions" before he will endorse the reparations plan, and he has refused to rule out legal action if it "carries significant risks" for his country.

Explaining the EU's Plan?

Brussels is under pressure prior to next Thursday's summit to come up with a solution that Belgium can agree to.

So far the EU has avoided accessing the assets themselves directly but for the past year has transferred the "windfall profits" from them to Ukraine. In 2024 that amounted to €3.7bn. Juridically, using the profits is seen as permissible as Russia is subject to sanctions and the earnings are not Moscow's sovereign assets.

But international military aid for Ukraine has declined sharply in 2025, and Europe has struggled to make up the shortfall left by the US decision to all but stop funding Ukraine under President Donald Trump.

There are at the moment two EU options seeking to furnishing Ukraine with €90bn, to finance a large portion of its budgetary necessities.

• One is to raise the money on financial markets, secured against the EU budget as a collateral. This is Belgium's first choice but it requires a unanimous vote 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 initially held in bonds but have now mostly matured into cash. That funding is Euroclear property deposited at the European Central Bank.

Brussels' executive arm acknowledges Belgium has legitimate concerns and states it is convinced it has resolved them.

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

Should Euroclear incur losses 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.

If Russia took legal action against Belgium itself, any judgment by a Russian court would not be enforced in the EU.

In a key development, EU ambassadors are expected to agree on Friday to freeze indefinitely Russia's central bank assets held in Europe for the foreseeable future.

Until now 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 extraordinary measure under Article 122 of the EU Treaties so the assets stay blocked as long as an "immediate threat to the financial well-being of the union" continues.

The Reasons Belgium is Still Not Convinced

Belgium is adamant it remains a staunch ally of Ukraine, but identifies regulatory pitfalls in the plan and fears being shouldering the fallout if things go wrong.

A usually fractured political scene in this case has rallied behind Prime Minister Bart de Wever, who is facing pressure from European colleagues.

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

While the EU might be able to secure adequate guarantees for the loan itself, Belgium is concerned about an further exposure of being vulnerable to extra damages or penalties.

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

"Financial institutions need to follow capital and liquidity requirements and shouldn't put all their eggs in one basket. Now the EU is telling Euroclear to do exactly that.

"What is the purpose of these banking laws? It's because we want banks to be stable. And if things fail it would fall to Belgium to bail out Euroclear. That's another reason why it's so important for Belgium to secure absolute protections for Euroclear."

Europe Under Pressure from Multiple Fronts

There is no time to lose, state seven EU member states including those closest to Russia such as the Baltics, Finland and Poland. They argue the scheme involving immobilized capital is "the economically realistic and practically possible solution".

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

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

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

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