Russia Responds at the EU's Plan to Loan Frozen Moscow's Funds to Kyiv

Kyiv remains running out of financial resources to keep going its armed forces and economy, after close to 48 months of full-scale conflict with Russia.

From the EU's perspective, the remedy to filling Ukraine's funding gap of €135.7bn for the following biennium lies in assets belonging to Russia that are frozen held by Belgian bank Euroclear, and Brussels seek to finalize the plan at their EU leaders' conference next week.

Authorities in Russia warn the EU plan would be an illegal seizure, and Moscow's monetary authority announced on Friday it was initiating legal action against Euroclear in a Moscow court even before a conclusive plan is made.

'Only Fair' to Use Moscow's Assets, Say Kyiv and Brussels

In total, Russia has about €210bn of its assets immobilized in the EU, and €185bn of that is managed by Euroclear.

The EU and Ukraine argue that that capital should be used to reconstruct what Russia has devastated: EU officials refers to it as a "loan for reparations" and has devised a plan to prop up Ukraine's economy amounting to €90bn.

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

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

Moscow's lawsuit was foreseen in Brussels. But it is not only Moscow that is concerned.

Authorities in Brussels is concerned it will be saddled with an massive bill if it all goes wrong, and Euroclear chief executive Valérie Urbain warns using the assets could "disrupt the international financial system".

Euroclear also has an estimated €16-17bn immobilised in Russia.

Belgium's PM Bart de Wever has presented the EU with a series of "rational, reasonable, and justified conditions" before he will endorse the reconstruction loan scheme, and he has not excluded legal action if it "presents significant risks" for his country.

Explaining the EU's Strategy?

European Union officials is racing against time prior to next Thursday's summit to finalize a compromise that Belgium can agree to.

Previously the EU has refrained from accessing the principal funds directly but starting in 2024 has paid the "windfall profits" from them to Ukraine. In 2024 that totaled €3.7bn. From a legal standpoint, using the interest is seen as less risky as Russia is sanctioned and the earnings are not Russian sovereign property.

But global military support for Ukraine has declined sharply in 2025, and Europe has struggled to cover the gap resulting from the US decision to virtually halt funding Ukraine under President Donald Trump.

There are at the moment two EU proposals seeking to providing Ukraine with €90bn, to finance two-thirds of its financial requirements.

• Option one is to secure the capital on capital markets, guaranteed by the EU budget as a collateral. This is Belgium's first choice but it needs a unanimous vote by EU leaders and that would be challenging when Budapest and Bratislava are against funding Ukraine's military.
• This makes the other option providing a loan of Ukraine cash from the frozen Russian funds, which were initially held in financial instruments but have now largely been converted into cash. That money is an asset of Euroclear located within the European Central Bank.

Brussels' executive arm accepts Belgium has justified fears and says 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.

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

Should Russia targeted Belgium itself, any judgment by a Russian court would not be enforced in the EU.

In a key development, 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 by consensus every six months to continue the freeze, which could have meant a constant risk to Belgium.

The EU ambassadors are set to use an emergency clause 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.

The Reasons Belgium is Not Yet Satisfied

Brussels is insistent it remains a staunch ally of Ukraine, but perceives juridical dangers in the plan and fears being forced to deal with the repercussions if things go wrong.

A usually partisan political environment in this case has come together in support of Prime Minister Bart de Wever, who is facing pressure from other European officials.

"Belgium is a small economy. Belgian GDP is approximately €565bn – imagine if it would need to bear a €185bn bill," says Veerle Colaert, academic specializing in financial regulation at KU Leuven University.

Although the EU might be able to secure enough protections for the loan itself, Belgium is concerned about an added risk of being exposed to extra legal costs.

Prof Colaert also contends the stipulation for Euroclear to issue credit to the EU would breach EU banking regulations.

"Banks need to adhere to stability regulations and shouldn't concentrate risk. Now the EU is telling 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 fail it would fall to Belgium to rescue Euroclear. That's a further cause why it's so crucial for Belgium to obtain ironclad assurances for Euroclear."

The European Union In a Difficult Position from All Sides

The situation is urgent, state seven EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They maintain the proposal to use Russian funds is "a fiscally viable and politically achievable solution".

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

Although Russia is insistent its money should not be accessed, there are further worries among leaders in Europe that the US may want to deploy Russia's immobilized billions for another purpose, as part of its own peace initiative.

Zelensky has indicated Ukraine is in discussions with Europe and the US on a recovery fund, but he is also cognizant the US has been holding discussions with Russia about future co-operation.

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