Russia Hits Back at the EU's Proposal to Loan Frozen Moscow's Funds to Kyiv

Kyiv remains depleting its cash to maintain its military and economy, after nearly four years of Russia's full-scale war.

In the view of European leaders, the solution to plugging Ukraine's financial shortfall of €135.7bn for the next two years is found in Moscow's immobilized funds sitting in Belgian bank Euroclear, and EU leaders aim to finalize the plan at their EU leaders' conference next week.

Russian officials state the EU plan would be an confiscation, and the Central Bank of Russia announced on Friday it was initiating legal action against Euroclear in a Moscow court even before a definitive agreement is made.

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

In total, Russia has roughly €210bn of its funds frozen in the EU, and €185bn of that is in the custody of Euroclear.

European and Ukrainian authorities contend that money should be used to rebuild what Russia has destroyed: Brussels terms it a "reconstruction loan" and has proposed a plan to prop up Ukraine's economy to the tune of €90bn.

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

Chancellor Friedrich Merz states the assets will "allow Ukraine to protect itself successfully against subsequent Russian attacks".

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

The Belgian government is concerned it will be saddled with an huge 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 roughly €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 agree to the reconstruction loan scheme, and he has left open the possibility of legal action if it "presents significant risks" for his country.

What is the EU's Strategy?

Brussels is racing against time before next Thursday's summit to come up with a solution that Belgium can accept.

So far the EU has held off using the frozen capital directly but for the past year has transferred the "excess income" from them to Ukraine. In 2024 that was €3.7bn. Juridically, using the profits is considered permissible as Russia is sanctioned and the proceeds are not Moscow's sovereign assets.

But global military support for Ukraine has slipped dramatically in 2025, and Europe has had trouble trying to cover the shortfall resulting from the US decision to virtually halt funding Ukraine under President Donald Trump.

There are presently two EU plans seeking to furnishing Ukraine with €90bn, to finance two-thirds of its funding needs.

• Option one is to borrow the funds on capital markets, backed by the EU budget as a surety. This is Belgium's favored solution but it demands a unanimous vote by EU leaders and that would be problematic when Budapest and Bratislava oppose funding Ukraine's military.
• That leaves lending Ukraine cash from the Moscow's immobilized capital, which were at first held in bonds but have now mostly turned into cash. That money is owned by Euroclear deposited at the European Central Bank.

The European Commission acknowledges Belgium has valid worries and claims it is assured it has dealt with them.

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

Should Euroclear face a financial hit of its own assets in Russia, that would be offset from assets belonging to Russia's own clearing house which are in the EU.

Should Russia targeted Belgium itself, any ruling 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 indefinitely.

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

The EU ambassadors are planning to use an extraordinary measure under Article 122 of the EU Treaties so the assets stay blocked as long as an "immediate threat to the financial well-being of the union" continues.

Why Belgium is Still Not On Board

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

A usually fractured political scene in this case has come together in support of Prime Minister Bart de Wever, who is facing pressure from fellow EU leaders.

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

Although the EU might be able to obtain adequate guarantees for the loan itself, Belgium is concerned about an added risk of being subject to extra fines or liabilities.

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

"Financial institutions need to comply with stability regulations and shouldn't make one enormous loan. Now the EU is asking Euroclear to do just that.

"Why do we have these financial regulations? It's because we want banks to be solvent. And if things go wrong it would become the responsibility of Belgium to bail out Euroclear. That's another reason why it's so crucial for Belgium to get water-tight guarantees for Euroclear."

The European Union Under Pressure from Multiple Fronts

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

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

Although Russia is insistent its money should not be touched, there are further worries among EU officials that the US may want to employ Russia's immobilized billions differently, as part of its own peace initiative.

Zelensky has indicated Ukraine is in discussions with Europe and the US on a reconstruction fund, but he is also cognizant the US has been holding discussions with Russia about potential collaboration.

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