Russia Hits Back at Europe's Proposal to Lend Frozen Moscow's Cash to Ukraine
Kyiv remains running out of cash to sustain its armed forces and economy, after almost four years of Russia's full-scale war.
For Europe, the remedy to plugging Kyiv's funding gap of €135.7bn for the next two years lies in assets belonging to Russia that are frozen located within Belgian bank Euroclear, and European Union officials hope to sign that off at their Brussels summit next week.
Moscow's representatives state 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.
'Only Fair' to Employ Moscow's Funds, Argue Ukraine and the EU
Overall, Russia has roughly €210bn of its funds immobilized in the EU, and €185bn of that is managed by Euroclear.
Brussels and Kyiv contend that that capital should be used to reconstruct what Russia has devastated: The European Commission calls it a "reconstruction loan" and has come up with a plan to support Ukraine's economy valued at €90bn.
"It is only just that the assets frozen from Russia should be used to reconstruct what Russia has devastated – and that that capital then becomes ours," states Ukrainian President Volodymyr Zelensky.
Chancellor Friedrich Merz argues the assets will "allow Ukraine to defend itself successfully against future Russian attacks".
The legal move by Moscow was foreseen in Brussels. But it is not only Moscow that is concerned.
Belgium is anxious it will be left with an massive bill if it all goes wrong, and Euroclear CEO Valérie Urbain says using the assets could "undermine the international financial system".
Euroclear also has an approximate €16-17bn frozen in Russia.
The leader of Belgium Bart de Wever has given Brussels a series of "pragmatic, fair, and legitimate conditions" before he will accept the reparations plan, and he has left open the possibility of legal action if it "carries significant risks" for his country.
What is the EU's Plan?
The EU is racing against time before next Thursday's summit to come up with a solution that Belgium can agree to.
Until now the EU has refrained from touching the principal funds directly but since last year has transferred the "extraordinary revenues" from them to Ukraine. In 2024 that amounted to €3.7bn. Juridically, using the revenue is considered safe as Russia is subject to sanctions and the returns are not Russian sovereign property.
But international military aid for Ukraine has fallen significantly in 2025, and Europe has found it difficult to cover the deficit resulting from the US decision to virtually halt funding Ukraine under President Donald Trump.
There are at the moment two EU plans aimed at providing Ukraine with €90bn, to pay for a majority of its budgetary necessities.
- One is to borrow the funds on capital markets, guaranteed by the EU budget as a surety. This is Belgium's first choice but it requires a unanimous vote by EU leaders and that would be difficult when Hungary and Slovakia object to funding Ukraine's military.
- This makes the other option lending Ukraine cash from the Moscow's immobilized capital, which were initially held in financial instruments but have now predominantly matured into cash. That funding is an asset of Euroclear held in the European Central Bank.
Brussels' executive arm recognizes Belgium has justified fears and claims it is convinced it has addressed them.
The scheme is for Belgium to be safeguarded with a assurance applying to all the €210bn of Russian assets in the EU.
If 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 took legal action against 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 all together every six months to extend the freeze, which could have meant a ongoing risk to Belgium.
The EU ambassadors are expected to use an emergency clause under Article 122 of the EU Treaties so the assets remain frozen as long as an "immediate threat to the economic security of the union" continues.
Why Belgium is Remains On Board
The Belgian government is insistent it remains a strong supporter of Ukraine, but perceives regulatory pitfalls in the plan and is concerned about being forced to deal with the consequences if things fail.
A typically divided political landscape in this case has rallied behind Prime Minister Bart de Wever, who is facing pressure from European colleagues.
"Belgium is a small economy. Belgian GDP is about €565bn – imagine if it would need to bear a €185bn bill," notes Veerle Colaert, professor of financial law at KU Leuven University.
While the EU might be able to obtain enough protections for the loan itself, Belgium worries about an added risk of being exposed to extra damages or penalties.
Prof Colaert also argues the stipulation for Euroclear to grant a loan to the EU would violate EU banking regulations.
"Lenders need to follow prudential rules and shouldn't put all their eggs in one basket. Now the EU is instructing Euroclear to do exactly 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 rescue Euroclear. That's an additional reason why it's so crucial for Belgium to secure water-tight guarantees for Euroclear."
Europe Facing Strain from Multiple Fronts
Time is of the essence, caution a group of EU member states including those closest to Russia such as the Baltics, Finland and Poland. They argue the proposal to use Russian funds is "the most financially feasible and politically achievable solution".
"It is a decisive moment for us," says 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".
Although Russia is unyielding its money should not be accessed, there are added concerns among European figures that the US may want to use Russia's blocked funds in another way, as part of its own peace initiative.
Zelensky has indicated Ukraine is in discussions with Europe and the US on a recovery 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
