Moscow Retaliates at the EU's Scheme to Loan Frozen Russian Funds to Ukraine

Ukraine is depleting its financial resources 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 solution to addressing Kyiv's budget hole of €135.7bn for the next two years lies in Moscow's immobilized funds held by Belgian bank Euroclear, and EU leaders hope to sign that off at their Brussels summit next week.

Russian officials caution the EU plan would be an illegal seizure, and Moscow's monetary authority stated on Friday it was initiating legal action against Euroclear in a Moscow court prior to a definitive agreement is made.

'Just' to Utilize Moscow's Assets, Say Kyiv and Brussels

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

European and Ukrainian authorities argue that those funds should be used to rebuild what Russia has destroyed: EU officials terms it a "loan for reparations" and has proposed a plan to support Ukraine's economy valued at €90bn.

"It's only fair that the assets frozen from Russia should be used to reconstruct what Russia has devastated – and that those funds then becomes Ukraine's," remarks Ukrainian President Volodymyr Zelensky.

German Chancellor Friedrich Merz states the assets will "enable Ukraine to shield itself effectively against any future Russian attacks".

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

The Belgian government is concerned it will be saddled with an huge bill if it all fails, and Euroclear chief executive Valérie Urbain says using the assets could "destabilise the global financial architecture".

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

Belgium's PM Bart de Wever has presented the EU with a series of "pragmatic, fair, and legitimate conditions" before he will endorse the reparations plan, and he has not excluded legal action if it "poses significant risks" for his country.

Explaining the EU's Plan?

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

Until now the EU has refrained from accessing the principal funds directly but for the past year has paid the "extraordinary revenues" from them to Ukraine. In 2024 that totaled €3.7bn. Juridically, using the interest is seen as permissible as Russia is sanctioned and the earnings are not Russian sovereign property.

But international military aid for Ukraine has declined sharply in 2025, and Europe has found it difficult to compensate for the gap left by the US decision to virtually halt funding Ukraine under President Donald Trump.

There are currently two EU proposals seeking to supplying Ukraine with €90bn, to pay for a large portion of its financial requirements.

• The first is to raise the money on capital markets, secured against the EU budget as a surety. This is Belgium's preferred option but it needs a unanimous vote by EU leaders and that would be problematic when Budapest and Bratislava object to funding Ukraine's military.
• That leaves lending Ukraine cash from the Russian assets, which were initially held in financial instruments but have now predominantly matured into cash. That money is owned by Euroclear deposited at the European Central Bank.

The EU's executive accepts Belgium has legitimate concerns and says it is confident it has resolved them.

The proposal is for Belgium to be safeguarded with a insurance encompassing 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 settlement agency which are in the EU.

In the event that Russia targeted Belgium itself, any judgment by a Russian court would not be accepted in the EU.

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

Until now they have had to vote unanimously every six months to extend the freeze, which could have meant a constant risk to Belgium.

The EU ambassadors are set to use an special provision under Article 122 of the EU Treaties so the assets stay blocked as long as an "clear risk to the economic security of the union" continues.

Why Belgium is Still Not Convinced

The Belgian government is adamant it remains a staunch ally of Ukraine, but sees legal risks in the plan and worries about being shouldering the repercussions if things go wrong.

A usually fractured political scene in this case has come together in support of Prime Minister Bart de Wever, who is under pressure from European colleagues.

"The Belgian economy is not large. Belgian GDP is approximately €565bn – think about if it would need to carry a €185bn bill," comments Veerle Colaert, academic specializing in financial regulation at KU Leuven University.

While the EU might be able to secure enough assurances for the loan itself, Belgium is concerned about an further exposure of being vulnerable to extra legal costs.

Prof Colaert also argues the demand for Euroclear to grant a loan to the EU would breach EU banking regulations.

"Banks need to comply with capital and liquidity requirements and shouldn't concentrate risk. Now the EU is telling Euroclear to do just that.

"Why do we have these banking laws? 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 another reason why it's so important for Belgium to obtain water-tight guarantees for Euroclear."

EU Leaders Under Pressure from Multiple Fronts

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

"This is a crucial test for us," says leading German conservative MP Norbert Röttgen. "If we fail, I don't know what we'll do afterwards. That's why we have to reach an agreement in a week's time".

Although Russia is insistent its money should not be touched, there are further worries among European figures that the US may want to deploy Russia's frozen billions differently, as part of its own diplomatic proposal.

Zelensky has said Ukraine is coordinating with Europe and the US on a reconstruction fund, but he is also aware 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 frozen assets being used by the US for reconstruction, with the US {taking|receiving