Moscow Retaliates at the EU's Plan to Lend Frozen Russian Funds to Kyiv

Kyiv remains depleting its funding to keep going its military and economy afloat, after nearly four years of full-scale conflict with Russia.

For Europe, the solution to filling Ukraine's financial shortfall of €135.7bn for the next two years rests with assets belonging to Russia that are frozen located within Belgian bank Euroclear, and European Union officials aim to give it the green light at their meeting in Brussels next week.

Authorities in Russia state the EU plan would be an illegal seizure, and Moscow's monetary authority announced on Friday it was taking to court Euroclear in a Moscow court ahead of a final decision is made.

'Only Fair' to Use Moscow's Funds, Say European and Ukrainian Officials

All told, Russia has about €210bn of its state reserves immobilized in the EU, and €185bn of that is held by Euroclear.

European and Ukrainian authorities contend that that capital should be used to reconstruct what Russia has destroyed: EU officials calls it a "reparations loan" and has proposed a plan to prop up Ukraine's economy valued at €90bn.

"It is appropriate that Moscow's blocked funds should be used to rebuild what Russia has devastated – and that those funds then becomes ours," states Ukrainian President Volodymyr Zelensky.

German Chancellor Friedrich Merz states the assets will "help Ukraine to defend itself effectively against subsequent Russian attacks".

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

The Belgian government is worried it will be saddled with an enormous bill if it all fails, and Euroclear head Valérie Urbain argues using the assets could "destabilise the world's financial order".

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

The leader of Belgium Bart de Wever has given Brussels a series of "pragmatic, fair, and legitimate conditions" before he will endorse the reconstruction loan scheme, and he has left open the possibility of legal action if it "presents significant risks" for his country.

Explaining the EU's Proposal?

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

Until now the EU has avoided accessing the principal funds directly but starting in 2024 has paid the "windfall profits" from them to Ukraine. In 2024 that was €3.7bn. Legally, using the revenue is considered safe as Russia is subject to sanctions and the returns are not property of the Russian state.

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

There are currently two EU proposals aimed at furnishing Ukraine with €90bn, to pay for a majority of its financial requirements.

• Option one is to secure the capital on the markets, guaranteed by the EU budget as a collateral. This is Belgium's favored solution but it requires a agreement by all by EU leaders and that would be problematic when Budapest and Bratislava are against funding Ukraine's military.
• That leaves loaning Ukraine cash from the frozen Russian funds, which were initially held in securities but have now mostly been converted into cash. That capital is an asset of Euroclear deposited at the European Central Bank.

The European Commission acknowledges Belgium has valid worries and claims it is confident it has addressed 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, that would be offset from assets belonging to Russia's own settlement agency which are in the EU.

Should Russia went after Belgium itself, any judgment by a Russian court would not be recognized in the EU.

In a significant move, 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 repeated 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 "clear risk to the economic interests of the union" continues.

The Reasons Belgium is Remains Satisfied

The Belgian government is insistent it remains a committed partner of Ukraine, but perceives legal risks in the plan and worries about being left to handle the consequences if things do not work out.

A typically fractured political scene in this case has come together in support of Prime Minister Bart de Wever, who is under pressure 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," says Veerle Colaert, expert in financial law at KU Leuven University.

Although the EU might be able to secure adequate protections for the loan itself, Belgium worries about an additional danger of being exposed to extra legal costs.

Prof Colaert also contends the requirement for Euroclear to issue credit to the EU would violate EU banking regulations.

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

"Why do we have these financial regulations? It's because we want banks to be stable. And if things go wrong it would fall to Belgium to save Euroclear. That's an additional reason why it's so important for Belgium to get ironclad protections for Euroclear."

The European Union Under Pressure from Every Direction

Time is of the essence, caution seven EU member states including those closest to Russia such as the Baltics, Finland and Poland. They believe the frozen assets plan is "the financially feasible and politically achievable solution".

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

While Russia is insistent its money should not be accessed, there are added concerns among European figures that the US may want to deploy Russia's frozen billions in another way, as part of its own diplomatic proposal.

Zelensky has said Ukraine is working with Europe and the US on a reconstruction fund, but he is also mindful the US has been engaging with Russia about potential collaboration.

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