Russia Retaliates at Europe's Proposal to Lend Frozen Moscow's Funds to Ukraine

Ukraine is facing a severe shortage of cash to sustain its armed forces and economy, after almost four years of Russia's full-scale war.

From the EU's perspective, the solution to filling Kyiv's budget hole of €135.7bn for the coming 24 months rests with assets belonging to Russia that are frozen sitting in Belgian bank Euroclear, and Brussels hope to give it the green light at their EU leaders' conference next week.

Moscow's representatives state the EU plan would be an confiscation, and the Central Bank of Russia announced on Friday it was taking to court Euroclear in a Moscow court ahead of a final decision is made.

'Appropriate' to Use Moscow's Funds, Say Kyiv and Brussels

Overall, Russia has approximately €210bn of its funds frozen in the EU, and €185bn of that is managed by Euroclear.

Brussels and Kyiv maintain that money should be used to restore what Russia has devastated: Brussels terms it a "reparations loan" and has proposed a plan to support Ukraine's economy valued at €90bn.

"It is only just that Moscow's blocked funds should be used to reconstruct what Russia has devastated – and that that capital then becomes ours," states Ukraine's Volodymyr Zelensky.

Germany's leader Friedrich Merz says the assets will "allow Ukraine to protect itself efficiently against any future Russian attacks".

The legal move by Moscow was anticipated in Brussels. But it is not only Moscow that is unhappy.

The Belgian government is worried it will be saddled with an massive bill if it all backfires, and Euroclear head Valérie Urbain says using the assets could "undermine the global financial architecture".

Euroclear also has an approximate €16-17bn frozen in Russia.

Belgian Prime Minister 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 refused to rule out legal action if it "carries significant risks" for his country.

What is the EU's Proposal?

European Union officials is under pressure ahead of next Thursday's summit to finalize a arrangement that Belgium can accept.

Until now the EU has held off touching the assets themselves directly but starting in 2024 has directed the "extraordinary revenues" from them to Ukraine. In 2024 that amounted to €3.7bn. Legally, using the profits is seen as permissible as Russia is sanctioned and the returns are not property of the Russian state.

But global military support for Ukraine has fallen significantly in 2025, and Europe has found it difficult to compensate for the shortfall left by the US decision to all but stop funding Ukraine under President Donald Trump.

There are presently two EU proposals seeking to supplying Ukraine with €90bn, to cover a large portion of its funding needs.

• Option one is to secure the capital on financial markets, backed by the EU budget as a guarantee. This is Belgium's first choice but it needs a agreement by all by EU leaders and that would be challenging when two member states are against funding Ukraine's military.
• The alternative is loaning Ukraine cash from the Russian assets, which were initially held in securities but have now mostly turned into cash. That money is an asset of Euroclear held in the European Central Bank.

The EU's executive acknowledges Belgium has valid worries and states it is assured it has dealt with them.

The proposal is for Belgium to be protected with a guarantee 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.

If Russia went after Belgium itself, any judgment by a Russian court would not be recognized in the EU.

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

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

The EU ambassadors are expected to use an extraordinary measure under Article 122 of the EU Treaties so the assets remain frozen as long as an "direct danger to the economic security of the union" continues.

Why Belgium is Remains On Board

Belgium is adamant it remains a committed partner of Ukraine, but sees regulatory pitfalls in the plan and fears being forced to deal with the consequences if things do not work out.

A typically partisan political environment in this case has rallied behind Prime Minister Bart de Wever, who is being pressured from other European officials.

"Belgium has a modest-sized economy. Belgian GDP is approximately €565bn – consider if it would need to carry a €185bn bill," comments Veerle Colaert, expert in financial law at KU Leuven University.

While the EU might be able to obtain sufficient guarantees for the loan itself, Belgium worries about an further exposure of being subject to extra fines or liabilities.

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

"Banks need to adhere to capital and liquidity requirements and shouldn't put all their eggs in one basket. Now the EU is asking Euroclear to do just that.

"Why do we have these bank rules? It's because we want banks to be solvent. And if things turn sour it would fall to Belgium to save Euroclear. That's another reason why it's so vital for Belgium to get absolute protections for Euroclear."

Europe Under Pressure from Multiple Fronts

There is no time to lose, 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 practically possible 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 afterwards. That's why we have to succeed in a week's time".

Although Russia is adamant its money should not be accessed, there are additional apprehensions among EU officials that the US may want to deploy Russia's immobilized billions in another way, 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 possible partnership.

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