Moscow Retaliates at Europe's Proposal to Lend Immobilized Russian Cash to Ukraine

Kyiv remains running out of financial resources to maintain its armed forces and economy afloat, after close to 48 months of full-scale conflict with Russia.

From the EU's perspective, the solution to addressing Kyiv's financial shortfall of €135.7bn for the following biennium is found in Moscow's immobilized funds held by Belgian bank Euroclear, and EU leaders aim to finalize the plan at their EU leaders' conference next week.

Authorities in Russia caution the EU plan would be an illegal seizure, and Russia's central bank declared on Friday it was initiating legal action against Euroclear in a Moscow court prior to a definitive agreement is made.

'Appropriate' to Employ Moscow's Funds, Argue European and Ukrainian Officials

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

The EU and Ukraine argue that that capital should be used to restore what Russia has destroyed: Brussels terms it a "reparations loan" and has come up with a plan to prop up Ukraine's economy to the tune of €90bn.

"It is only just that Russia's frozen assets should be used to rebuild what Russia has devastated – and that money then becomes Ukraine's," states Ukrainian President Volodymyr Zelensky.

Germany's leader Friedrich Merz argues the assets will "enable Ukraine to shield itself successfully against any future Russian attacks".

Moscow's lawsuit was foreseen in Brussels. But it is not only Moscow that is concerned.

Belgium is anxious it will be burdened by an massive bill if it all goes wrong, and Euroclear head Valérie Urbain argues using the assets could "undermine the international financial system".

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

Belgian Prime Minister Bart de Wever has set the EU a series of "logical, sensible, and warranted conditions" before he will agree to the reconstruction loan scheme, and he has not excluded legal action if it "presents significant risks" for his country.

Explaining the EU's Plan?

European Union officials is under pressure prior to next Thursday's summit to agree on a arrangement that Belgium can accept.

Until now the EU has avoided using the frozen capital directly but starting in 2024 has paid the "windfall profits" from them to Ukraine. In 2024 that amounted to €3.7bn. Juridically, using the revenue is seen as less risky as Russia is under sanction 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 make up the shortfall resulting from the US decision to all but stop funding Ukraine under President Donald Trump.

There are currently two EU proposals designed to furnishing Ukraine with €90bn, to cover a large portion of its financial requirements.

• The first is to borrow the funds on financial markets, secured against the EU budget as a surety. This is Belgium's first choice but it requires a consensus by EU leaders and that would be difficult when Budapest and Bratislava are against funding Ukraine's military.
• The alternative is providing a loan of Ukraine cash from the frozen Russian funds, which were at first held in bonds but have now largely been converted into cash. That capital is owned by Euroclear deposited at the European Central Bank.

Brussels' executive arm acknowledges Belgium has justified fears and states it is assured it has addressed them.

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

Should Euroclear suffer a loss of its own assets in Russia, that would be offset from assets belonging to Russia's own settlement agency which are in the EU.

Should Russia targeted Belgium itself, any decision by a Russian court would not be recognized in the EU.

In a significant move, EU ambassadors are set to approve on Friday to permanently block Russia's central bank assets held in Europe permanently.

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

The EU ambassadors are planning to use an emergency clause under Article 122 of the EU Treaties so the assets remain frozen as long as an "clear risk to the economic interests of the union" continues.

The Reasons Belgium is Remains Convinced

Belgium is insistent it remains a staunch ally of Ukraine, but sees regulatory pitfalls in the plan and is concerned about being forced to deal with the repercussions if things go wrong.

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

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

Although the EU might be able to secure adequate assurances for the loan itself, Belgium worries about an further exposure of being exposed to extra damages or penalties.

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

"Lenders need to adhere to stability regulations and shouldn't make one enormous loan. Now the EU is asking Euroclear to do precisely that.

"Why do we have these banking laws? It's because we want banks to be stable. And if things go wrong it would become the responsibility of Belgium to save Euroclear. That's another reason why it's so vital for Belgium to secure absolute guarantees for Euroclear."

The European Union In a Difficult Position from Multiple Fronts

There is no time to lose, state a group of EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They maintain the proposal to use Russian funds is "the most fiscally viable and practically possible solution".

"It is a decisive moment for us," warns leading German conservative MP Norbert Röttgen. "If we fail, I don't know what we'll do afterwards. That's why we have to finalize the deal in a week's time".

While Russia is adamant its money should not be accessed, there are further worries among EU officials that the US may want to deploy Russia's blocked funds for another purpose, as part of its own peace plan.

Zelensky has indicated Ukraine is working with Europe and the US on a reconstruction fund, but he is also aware the US has been engaging with Russia about future co-operation.

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