Russia Retaliates at the EU's Proposal to Loan Frozen Moscow's Funds to Ukraine

Kyiv remains depleting its funding to keep going its military and economy afloat, after nearly four years of the ongoing invasion by Moscow.

From the EU's perspective, the answer to addressing Kyiv's budget hole of €135.7bn for the next two years is found in Moscow's immobilized funds located within Belgian bank Euroclear, and European Union officials aim to finalize the plan at their EU leaders' conference next week.

Authorities in Russia warn the EU plan would be an illegal seizure, and Moscow's monetary authority stated on Friday it was suing Euroclear in a Moscow court ahead of a final decision is made.

'Only Fair' to Utilize Moscow's Assets, Assert European and Ukrainian Officials

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

The EU and Ukraine argue that money should be used to reconstruct what Russia has destroyed: The European Commission refers to it as a "reconstruction loan" and has proposed a plan to prop up Ukraine's economy amounting to €90bn.

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

Germany's leader Friedrich Merz says the assets will "enable Ukraine to shield itself effectively against subsequent Russian attacks".

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

The Belgian government is worried it will be burdened by an huge bill if it all backfires, 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.

The leader of Belgium Bart de Wever has presented the EU with a series of "logical, sensible, and warranted conditions" before he will endorse the reparations plan, and he has refused to rule out legal action if it "poses significant risks" for his country.

What is the EU's Plan?

European Union officials is under pressure prior to next Thursday's summit to finalize a arrangement that Belgium can support.

So far the EU has held off using the assets themselves directly but for the past year has directed the "windfall profits" from them to Ukraine. In 2024 that amounted to €3.7bn. Legally, using the revenue is seen as safe as Russia is under sanction and the earnings are not Russian sovereign property.

But international military aid for Ukraine has slipped dramatically in 2025, and Europe has struggled to cover the deficit caused by the US decision to virtually halt funding Ukraine under President Donald Trump.

There are presently two EU proposals aimed at providing Ukraine with €90bn, to cover a majority of its funding needs.

• One is to secure the capital on financial markets, secured against the EU budget as a collateral. This is Belgium's favored solution but it demands a unanimous vote by EU leaders and that would be problematic when two member states oppose funding Ukraine's military.
• The alternative is loaning Ukraine cash from the Moscow's immobilized capital, which were at first held in bonds but have now predominantly been converted into cash. That capital is an asset of Euroclear deposited at the European Central Bank.

The EU's executive accepts Belgium has justified fears and states it is convinced it has resolved them.

The plan is for Belgium to be shielded with a insurance covering 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 went after Belgium itself, any decision by a Russian court would not be recognized in the EU.

In a key development, EU ambassadors are expected to agree on Friday to immobilise 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 repeated risk to Belgium.

The EU ambassadors are expected to use an special provision 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.

Why Belgium is Not Yet Convinced

Brussels is firm it remains a staunch ally of Ukraine, but perceives regulatory pitfalls in the plan and worries about being forced to deal with the fallout if things fail.

A typically fractured political scene in this case has united behind Prime Minister Bart de Wever, who is facing pressure from fellow EU leaders.

"The Belgian economy is not large. Belgian GDP is around €565bn – imagine 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 protections for the loan itself, Belgium is concerned about an added risk of being vulnerable to extra fines or liabilities.

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

"Financial institutions need to follow capital and liquidity requirements and shouldn't concentrate risk. Now the EU is telling Euroclear to do exactly that.

"Why do we have these financial regulations? It's because we want banks to be secure. And if things go wrong it would be up to Belgium to rescue Euroclear. That's an additional reason why it's so important for Belgium to get absolute protections for Euroclear."

EU Leaders Facing Strain from Every Direction

Time is of the essence, warn seven EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They argue the frozen assets plan is "a economically realistic and politically achievable solution".

"It's a matter of destiny for us," states leading German conservative MP Norbert Röttgen. "Should we not succeed, I don't know what we'll do subsequently. That's why we have to finalize the deal in a week's time".

While Russia is adamant its money should not be used, there are further worries among EU officials that the US may want to employ Russia's blocked funds differently, as part of its own diplomatic proposal.

Zelensky has stated Ukraine is working with Europe and the US on a recovery fund, but he is also cognizant 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 frozen assets being used by the US for reconstruction, with the US {taking|receiving