Moscow Retaliates at the EU's Proposal to Loan Frozen Russian Cash to Ukraine

Kyiv remains running out of funding to sustain its armed forces and economy, after close to 48 months of the ongoing invasion by Moscow.

In the view of European leaders, the remedy to addressing Ukraine's financial shortfall of €135.7bn for the next two years lies in assets belonging to Russia that are frozen held by Belgian bank Euroclear, and European Union officials seek to finalize the plan at their meeting in Brussels next week.

Authorities in Russia caution the EU plan would be an illegal seizure, and the Central Bank of Russia declared on Friday it was suing Euroclear in a Moscow court prior to a definitive agreement is made.

'Only Fair' to Use Moscow's Assets, Argue Kyiv and Brussels

In total, Russia has roughly €210bn of its assets immobilized in the EU, and €185bn of that is held by Euroclear.

European and Ukrainian authorities contend that those funds should be used to reconstruct what Russia has destroyed: The European Commission calls it a "loan for reparations" and has devised a plan to bolster Ukraine's economy amounting to €90bn.

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

German Chancellor Friedrich Merz argues the assets will "allow Ukraine to defend itself successfully against future Russian attacks".

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

Belgium is concerned it will be saddled with an massive bill if it all fails, and Euroclear CEO Valérie Urbain warns using the assets could "disrupt the world's financial order".

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

The leader of Belgium Bart de Wever has presented the EU with a series of "rational, reasonable, and justified conditions" before he will endorse the reconstruction loan scheme, and he has not excluded legal action if it "carries significant risks" for his country.

The Details of the EU's Plan?

The EU is racing against time before next Thursday's summit to agree on a compromise that Belgium can accept.

So far the EU has refrained from using the frozen capital directly but for the past year has paid the "windfall profits" from them to Ukraine. In 2024 that amounted to €3.7bn. From a legal standpoint, using the revenue is deemed safe as Russia is sanctioned and the proceeds are not Russian sovereign property.

But international military aid for Ukraine has fallen significantly in 2025, and Europe has struggled to compensate for the shortfall 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 cover a majority of its funding needs.

• Option one is to raise the money on financial markets, backed by the EU budget as a surety. This is Belgium's first choice but it needs a unanimous vote by EU leaders and that would be problematic when two member states oppose funding Ukraine's military.
• The alternative is lending Ukraine cash from the frozen Russian funds, which were at first held in financial instruments but have now mostly matured into cash. That capital is Euroclear property held in the European Central Bank.

The European Commission accepts Belgium has valid worries and states it is convinced it has addressed them.

The plan is for Belgium to be shielded with a guarantee encompassing 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 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.

As an important step, EU ambassadors are set to approve on Friday to freeze indefinitely Russia's central bank assets held in Europe for the foreseeable future.

Heretofore they have had to vote all together every six months to extend 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 continue to be immobilized as long as an "immediate threat to the economic security of the union" continues.

The Reasons Belgium is Still Not Convinced

Belgium is firm it remains a staunch ally of Ukraine, but perceives legal risks in the plan and fears being shouldering the fallout if things go wrong.

A normally divided political landscape in this case has rallied behind Prime Minister Bart de Wever, who is being pressured from other European officials.

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

Although the EU might be able to arrange sufficient assurances for the loan itself, Belgium is concerned about an further exposure of being vulnerable to extra damages or penalties.

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

"Financial institutions need to comply with prudential rules and shouldn't concentrate risk. Now the EU is instructing Euroclear to do just that.

"Why do we have these bank rules? It's because we want banks to be stable. And if things fail it would be up to Belgium to bail out Euroclear. That's a further cause why it's so vital for Belgium to obtain ironclad guarantees for Euroclear."

EU Leaders Facing Strain from All Sides

Time is of the essence, caution seven EU member states including those bordering Russia such as the Baltics, Finland and Poland. They maintain the frozen assets plan is "a financially feasible and practically possible solution".

"It is a decisive moment for us," warns 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".

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

Zelensky has said Ukraine is in discussions 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.

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