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

Ukraine is running out of financial resources to maintain its military and economy afloat, after almost four years of full-scale conflict with Russia.

In the view of European leaders, the solution to plugging Ukraine's funding gap of €135.7bn for the following biennium rests with assets belonging to Russia that are frozen held by Belgian bank Euroclear, and European Union officials hope to give it the green light at their EU leaders' conference next week.

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

'Appropriate' to Utilize Russia's Assets, Say European and Ukrainian Officials

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

The EU and Ukraine contend that money should be used to reconstruct what Russia has laid waste to: Brussels refers to it as a "reparations loan" and has proposed a plan to bolster Ukraine's economy amounting to €90bn.

"It's only fair that Russia's frozen assets should be used to reconstruct what Russia has devastated – and that that capital then becomes Ukraine's," remarks Ukrainian President Volodymyr Zelensky.

Germany's leader Friedrich Merz states the assets will "enable Ukraine to defend itself efficiently against future Russian attacks".

The legal move by Moscow was foreseen in Brussels. But it is not only Moscow that is concerned.

The Belgian government is anxious it will be burdened by an enormous bill if it all backfires, and Euroclear head Valérie Urbain says using the assets could "undermine the international financial system".

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

Belgian Prime Minister Bart de Wever has set the EU a series of "pragmatic, fair, and legitimate conditions" before he will agree to the reconstruction loan scheme, and he has not excluded legal action if it "poses significant risks" for his country.

Explaining the EU's Proposal?

Brussels is under pressure ahead of next Thursday's summit to finalize a solution that Belgium can accept.

Until now the EU has refrained from accessing the principal funds directly but starting in 2024 has directed the "extraordinary revenues" from them to Ukraine. In 2024 that amounted to €3.7bn. From a legal standpoint, using the profits is considered safe as Russia is subject to sanctions and the proceeds are not Moscow's sovereign assets.

But foreign defense assistance for Ukraine has fallen significantly in 2025, and Europe has found it difficult to compensate for the gap resulting from the US decision to all but stop funding Ukraine under President Donald Trump.

There are presently two EU proposals aimed at providing Ukraine with €90bn, to pay for a majority of its budgetary necessities.

• Option one is to raise the money on the markets, guaranteed by the EU budget as a guarantee. This is Belgium's preferred option but it demands a unanimous vote by EU leaders and that would be problematic when Budapest and Bratislava are against funding Ukraine's military.
• The alternative is lending Ukraine cash from the Russian assets, which were at first held in financial instruments but have now mostly matured into cash. That capital is Euroclear property held in the European Central Bank.

The European Commission acknowledges Belgium has legitimate concerns and states it is confident it has addressed them.

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

If Euroclear suffer a loss of its own assets in Russia, that would be offset from assets belonging to Russia's own clearing house which are in the EU.

If Russia took legal action against Belgium itself, any ruling by a Russian court would not be recognized in the EU.

As an important step, EU ambassadors are expected to agree on Friday to freeze indefinitely Russia's central bank assets held in Europe for the foreseeable future.

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

The EU ambassadors are planning to use an emergency clause under Article 122 of the EU Treaties so the assets remain frozen as long as an "clear risk to the economic security of the union" continues.

The Reasons Belgium is Still Not On Board

Belgium is firm it remains a committed partner of Ukraine, but identifies juridical dangers in the plan and fears being forced to deal with the fallout if things fail.

A typically fractured political scene 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," comments Veerle Colaert, professor of financial law at KU Leuven University.

Although the EU might be able to arrange enough guarantees for the loan itself, Belgium fears an added risk of being exposed to extra legal costs.

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

"Lenders need to adhere to capital and liquidity requirements and shouldn't make one enormous loan. Now the EU is instructing Euroclear to do precisely that.

"Why do we have these banking laws? It's because we want banks to be solvent. And if things turn sour it would fall to Belgium to rescue Euroclear. That's an additional reason why it's so crucial for Belgium to obtain absolute guarantees for Euroclear."

The European Union Under Pressure from All Sides

There is no time to lose, warn seven EU member states including those closest to Russia such as the Baltics, Finland and Poland. They believe the scheme involving immobilized capital is "a fiscally viable and politically realistic solution".

"It is a decisive moment for us," warns 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 reach an agreement in a week's time".

Although Russia is adamant its money should not be touched, there are added concerns among leaders in Europe that the US may want to employ Russia's blocked funds in another way, as part of its own peace plan.

Zelensky has stated Ukraine is in discussions with Europe and the US on a rebuilding fund, but he is also aware the US has been talking to Russia about future co-operation.

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