Moscow Retaliates at Europe's Proposal to Loan Immobilized Russian Funds to Ukraine

Ukraine is running out of cash to keep going its armed forces and economy afloat, after nearly four years of Russia's full-scale war.

In the view of European leaders, the answer to addressing Ukraine's financial shortfall of €135.7bn for the coming 24 months rests with assets belonging to Russia that are frozen held by Belgian bank Euroclear, and EU leaders aim to sign that off at their EU leaders' conference next week.

Moscow's representatives warn the EU plan would be an act of theft, and Russia's central bank announced on Friday it was initiating legal action against Euroclear in a Moscow court prior to a definitive agreement is made.

'Just' to Use Moscow's Assets, Argue Kyiv and Brussels

In total, Russia has about €210bn of its funds frozen in the EU, and €185bn of that is in the custody of Euroclear.

Brussels and Kyiv maintain that those funds should be used to restore what Russia has laid waste to: The European Commission terms it a "reconstruction loan" and has proposed a plan to prop up Ukraine's economy valued at €90bn.

"It's only fair that Russia's frozen assets should be used to reconstruct what Russia has destroyed – and that that capital then becomes ours," says Ukraine's Volodymyr Zelensky.

Chancellor Friedrich Merz argues the assets will "allow Ukraine to protect itself successfully against subsequent 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 burdened by an huge bill if it all fails, and Euroclear CEO Valérie Urbain argues using the assets could "disrupt the international financial system".

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

Belgium's PM Bart de Wever has given Brussels a series of "pragmatic, fair, and legitimate conditions" before he will accept the reparations plan, and he has refused to rule out legal action if it "poses significant risks" for his country.

Explaining the EU's Proposal?

The EU is under pressure before next Thursday's summit to come up with a solution that Belgium can support.

Until now the EU has refrained from accessing the assets themselves directly but since last year has transferred the "extraordinary revenues" from them to Ukraine. In 2024 that amounted to €3.7bn. Legally, using the profits is considered less risky as Russia is subject to sanctions and the returns are not property of the Russian state.

But global military support for Ukraine has fallen significantly in 2025, and Europe has found it difficult to make up the gap resulting from the US decision to all but stop funding Ukraine under President Donald Trump.

There are currently two EU proposals designed to providing Ukraine with €90bn, to pay for two-thirds of its budgetary necessities.

• One is to borrow the funds on the markets, backed by 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 oppose funding Ukraine's military.
• This makes the other option lending Ukraine cash from the frozen Russian funds, which were initially held in financial instruments but have now mostly been converted into cash. That capital is Euroclear property held in the European Central Bank.

The European Commission acknowledges Belgium has justified fears and states it is assured it has addressed them.

The plan is for Belgium to be protected 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 shortfall would be covered from assets belonging to Russia's own clearing house which are in the EU.

In the event that Russia targeted Belgium itself, any ruling by a Russian court would not be accepted in the EU.

In a significant move, EU ambassadors are expected to agree on Friday to immobilise Russia's central bank assets held in Europe permanently.

Until now they have had to vote by consensus 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 remain frozen as long as an "direct danger to the financial well-being of the union" continues.

The Reasons Belgium is Not Yet Convinced

The Belgian government is firm it remains a strong supporter of Ukraine, but sees juridical dangers in the plan and is concerned about being left to handle the consequences if things go wrong.

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 around €565bn – imagine if it would need to shoulder a €185bn bill," comments Veerle Colaert, expert in financial law at KU Leuven University.

Although the EU might be able to obtain sufficient assurances for the loan itself, Belgium fears an additional danger of being subject to extra fines or liabilities.

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

"Banks need to comply with stability regulations and shouldn't concentrate risk. Now the EU is asking Euroclear to do exactly that.

"What is the purpose of these bank rules? It's because we want banks to be solvent. And if things fail it would fall to Belgium to rescue Euroclear. That's another reason why it's so important for Belgium to obtain ironclad assurances for Euroclear."

Europe In a Difficult Position from Multiple Fronts

There is no time to lose, state a group of EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They argue the proposal to use Russian funds is "the economically realistic and politically realistic solution".

"This is a crucial test for us," warns 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 reach an agreement in a week's time".

While Russia is unyielding its money should not be touched, there are additional apprehensions among EU officials that the US may want to employ Russia's blocked funds in another way, as part of its own peace initiative.

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