Moscow Retaliates at Europe's Plan to Lend Frozen Russian Cash to Kyiv

Ukraine is running out of funding to maintain its military and economy, after almost four years of the ongoing invasion by Moscow.

In the view of European leaders, the remedy to addressing Kyiv's budget hole of €135.7bn for the next two years rests with Moscow's immobilized funds held by Belgian bank Euroclear, and Brussels seek to give it the green light at their meeting in Brussels next week.

Authorities in Russia warn the EU plan would be an confiscation, and Russia's central bank announced on Friday it was initiating legal action against Euroclear in a Moscow court even before a definitive agreement is made.

'Appropriate' to Employ Russia's Assets, Say Kyiv and Brussels

All told, Russia has approximately €210bn of its assets blocked in the EU, and €185bn of that is managed by Euroclear.

European and Ukrainian authorities maintain that money should be used to reconstruct what Russia has laid waste to: Brussels terms it a "loan for reparations" and has proposed a plan to support Ukraine's economy to the tune of €90bn.

"It is appropriate that the assets frozen from Russia should be used to reconstruct what Russia has destroyed – and that that capital then becomes Ukraine's," remarks Ukrainian President Volodymyr Zelensky.

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

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

Authorities in Brussels is worried it will be saddled with an enormous bill if it all backfires, and Euroclear chief executive Valérie Urbain says using the assets could "disrupt the world's financial order".

Euroclear also has an roughly €16-17bn locked in Russia.

The leader of Belgium Bart de Wever has presented the EU with a series of "pragmatic, fair, and legitimate conditions" before he will accept the reconstruction loan scheme, and he has refused to rule out legal action if it "poses significant risks" for his country.

The Details of the EU's Plan?

European Union officials is racing against time before next Thursday's summit to come up with a compromise that Belgium can accept.

So far the EU has avoided using the frozen capital directly but starting in 2024 has transferred the "extraordinary revenues" from them to Ukraine. In 2024 that amounted to €3.7bn. Juridically, using the profits is seen as permissible as Russia is subject to sanctions and the returns are not Russian sovereign property.

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

There are presently two EU options aimed at furnishing Ukraine with €90bn, to cover two-thirds of its funding needs.

• Option one is to secure the capital on financial markets, secured against the EU budget as a collateral. This is Belgium's preferred option but it requires a consensus by EU leaders and that would be difficult when Budapest and Bratislava object to funding Ukraine's military.
• That leaves lending Ukraine cash from the Russian assets, which were initially held in bonds but have now mostly been converted into cash. That capital is an asset of Euroclear deposited at the European Central Bank.

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

The proposal is for Belgium to be shielded with a guarantee covering all the €210bn of Russian assets in the EU.

If Euroclear incur losses 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 took legal action against Belgium itself, any decision by a Russian court would not be recognized in the EU.

As an important step, EU ambassadors are expected to agree on Friday to permanently block Russia's central bank assets held in Europe indefinitely.

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 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 Remains Satisfied

Brussels is insistent it remains a committed partner of Ukraine, but sees regulatory pitfalls in the plan and fears being left to handle the fallout if things go wrong.

A typically partisan political environment in this case has rallied behind Prime Minister Bart de Wever, who is being pressured from fellow EU leaders.

"The Belgian economy is not large. Belgian GDP is approximately €565bn – consider if it would need to carry a €185bn bill," comments Veerle Colaert, professor of financial law at KU Leuven University.

While the EU might be able to obtain sufficient protections for the loan itself, Belgium worries about an additional danger of being vulnerable to extra damages or penalties.

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

"Banks need to follow prudential rules and shouldn't put all their eggs in one basket. Now the EU is instructing Euroclear to do just that.

"What is the purpose of these banking laws? It's because we want banks to be stable. And if things turn sour it would fall to Belgium to save Euroclear. That's an additional reason why it's so vital for Belgium to get absolute protections for Euroclear."

Europe In a Difficult Position from All Sides

There is no time to lose, caution a group of EU member states including those closest to Russia such as the Baltics, Finland and Poland. They believe the proposal to use Russian funds is "the most financially feasible and politically realistic solution".

"This is a crucial test for us," says leading German conservative MP Norbert Röttgen. "If the plan collapses, I don't know what we'll do afterwards. That's why we have to finalize the deal in a week's time".

Although Russia is unyielding its money should not be used, there are added concerns among European figures that the US may want to deploy Russia's blocked funds differently, as part of its own diplomatic proposal.

Zelensky has stated Ukraine is coordinating with Europe and the US on a recovery fund, but he is also mindful the US has been engaging 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