Russia Retaliates at Europe's Proposal to Loan Frozen Moscow's Assets to Ukraine

Ukraine is running out of funding to keep going its armed forces and economy, after close to 48 months of the ongoing invasion by Moscow.

For Europe, the remedy to filling Kyiv's budget hole of €135.7bn for the coming 24 months lies in frozen Russian assets held by Belgian bank Euroclear, and European Union officials aim to sign that off at their Brussels summit next week.

Russian officials caution 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 prior to a definitive agreement is made.

'Just' to Employ Russia's Funds, Say European and Ukrainian Officials

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

European and Ukrainian authorities contend that those funds should be used to reconstruct what Russia has devastated: The European Commission refers to it as a "reparations loan" and has devised a plan to bolster Ukraine's economy to the tune of €90bn.

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

Chancellor Friedrich Merz says the assets will "help Ukraine to defend itself effectively against future Russian attacks".

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

Authorities in Brussels is worried it will be burdened by an huge bill if it all fails, and Euroclear chief executive Valérie Urbain says using the assets could "undermine the international financial system".

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

Belgium's PM Bart de Wever has presented the EU with a series of "rational, reasonable, and justified conditions" before he will agree to the reparations plan, and he has left open the possibility of legal action if it "poses significant risks" for his country.

Explaining the EU's Plan?

Brussels is working to the wire prior to next Thursday's summit to agree on a arrangement that Belgium can accept.

Until now the EU has held off accessing the frozen capital directly but starting in 2024 has transferred the "excess income" from them to Ukraine. In 2024 that totaled €3.7bn. Juridically, using the revenue is considered less risky as Russia is sanctioned and the earnings are not Russian sovereign property.

But global military support for Ukraine has slipped dramatically in 2025, and Europe has struggled to cover the gap caused by the US decision to all but stop funding Ukraine under President Donald Trump.

There are presently two EU options seeking to providing Ukraine with €90bn, to pay for a majority of its funding needs.

• The first is to borrow the funds on capital markets, backed by the EU budget as a guarantee. This is Belgium's preferred option but it requires a unanimous vote by EU leaders and that would be challenging when Budapest and Bratislava oppose funding Ukraine's military.
• The alternative is lending Ukraine cash from the Moscow's immobilized capital, which were at first held in bonds but have now mostly turned into cash. That funding is Euroclear property located within the European Central Bank.

The EU's executive acknowledges Belgium has legitimate concerns and says it is confident it has addressed them.

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

Should Euroclear face a financial hit of its own assets in Russia, the loss would be compensated from assets belonging to Russia's own settlement agency which are in the EU.

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

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

Previously they have had to vote by consensus every six months to extend the freeze, which could have meant a ongoing risk to Belgium.

The EU ambassadors are set to use an special provision under Article 122 of the EU Treaties so the assets stay blocked as long as an "direct danger to the economic interests of the union" continues.

Why Belgium is Not Yet Convinced

Belgium is insistent it remains a staunch ally of Ukraine, but perceives juridical dangers in the plan and is concerned about being left to handle the repercussions if things go wrong.

A normally fractured political scene in this case has united behind Prime Minister Bart de Wever, who is being pressured from fellow EU leaders.

"Belgium is a small economy. Belgian GDP is around €565bn – think about if it would need to bear a €185bn bill," comments Veerle Colaert, expert in financial law at KU Leuven University.

While the EU might be able to obtain adequate guarantees for the loan itself, Belgium worries about an additional danger of being subject to extra legal costs.

Prof Colaert also argues the demand for Euroclear to issue credit to the EU would violate EU banking regulations.

"Banks need to comply with prudential rules and shouldn't concentrate risk. Now the EU is telling Euroclear to do exactly that.

"What is the purpose of these financial regulations? It's because we want banks to be stable. And if things fail it would be up to Belgium to rescue Euroclear. That's a further cause why it's so important for Belgium to get absolute protections for Euroclear."

Europe In a Difficult Position from Multiple Fronts

Time is of the essence, warn seven EU member states including those bordering Russia such as the Baltics, Finland and Poland. They believe the scheme involving immobilized capital is "the financially feasible and politically realistic 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 next. That's why we have to finalize the deal in a week's time".

Although Russia is adamant its money should not be used, there are added concerns among EU officials that the US may want to employ Russia's immobilized billions for another purpose, as part of its own diplomatic proposal.

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 talking to Russia about potential collaboration.

A preliminary version of the US peace plan referred to $100bn of Russia's blocked funds being used by the US for reconstruction, with the US {taking|receiving