Moscow Retaliates at the EU's Scheme to Loan Frozen Russian Funds to Ukraine

Ukraine is facing a severe shortage of cash to maintain its armed forces and economy, after almost four years of full-scale conflict with Russia.

In the view of European leaders, the solution to filling Kyiv's budget hole of €135.7bn for the next two years lies in frozen Russian assets held by Belgian bank Euroclear, and Brussels hope to sign that off at their EU leaders' conference next week.

Russian officials state the EU plan would be an act of theft, and Russia's central bank stated on Friday it was suing Euroclear in a Moscow court ahead of a final decision is made.

'Appropriate' to Utilize Moscow's Funds, Assert Ukraine and the EU

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

European and Ukrainian authorities contend that that capital should be used to restore what Russia has laid waste to: The European Commission terms it a "loan for reparations" and has proposed a plan to support Ukraine's economy to the tune of €90bn.

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

German Chancellor Friedrich Merz states the assets will "allow Ukraine to protect itself successfully against future Russian attacks".

Russia's court action was foreseen in Brussels. But it is not only Moscow that is dissatisfied.

Belgium is worried it will be burdened by an massive bill if it all fails, and Euroclear CEO Valérie Urbain warns using the assets could "disrupt the global financial architecture".

Euroclear also has an roughly €16-17bn locked in Russia.

Belgian Prime Minister 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 refused to rule out legal action if it "presents significant risks" for his country.

What is the EU's Plan?

The EU is under pressure prior to next Thursday's summit to come up with a compromise that Belgium can accept.

Until now the EU has held off using the frozen capital directly but starting in 2024 has paid the "excess income" from them to Ukraine. In 2024 that totaled €3.7bn. Juridically, using the revenue is considered safe as Russia is under sanction and the proceeds are not Moscow's sovereign assets.

But foreign defense assistance for Ukraine has declined sharply in 2025, and Europe has found it difficult to compensate for the gap resulting from the US decision to virtually halt funding Ukraine under President Donald Trump.

There are currently two EU proposals aimed at supplying Ukraine with €90bn, to cover two-thirds of its financial requirements.

• One is to secure the capital on the markets, backed 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 two member states are against funding Ukraine's military.
• That leaves lending Ukraine cash from the Moscow's immobilized capital, which were initially held in securities but have now largely matured into cash. That money is an asset of Euroclear held in the European Central Bank.

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

The plan is for Belgium to be protected with a assurance applying to all the €210bn of Russian assets in the EU.

If Euroclear incur losses of its own assets in Russia, the shortfall would be covered from assets belonging to Russia's own settlement agency which are in the EU.

If Russia targeted 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 by consensus every six months to renew the freeze, which could have meant a constant 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 "immediate threat to the financial well-being of the union" continues.

The Reasons Belgium is Still Not Satisfied

The Belgian government is firm it remains a committed partner of Ukraine, but perceives regulatory pitfalls in the plan and is concerned about being forced to deal with the consequences if things do not work out.

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

"The Belgian economy is not large. Belgian GDP is about €565bn – imagine if it would need to carry a €185bn bill," comments Veerle Colaert, expert in financial law at KU Leuven University.

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

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

"Lenders need to comply with capital and liquidity requirements and shouldn't put all their eggs in one basket. Now the EU is instructing Euroclear to do just that.

"What is the purpose of these banking laws? It's because we want banks to be secure. And if things turn sour it would be up to Belgium to save Euroclear. That's an additional reason why it's so vital for Belgium to secure water-tight guarantees for Euroclear."

The European Union Under Pressure from All Sides

Time is of the essence, state seven EU member states including those closest to Russia such as the Baltics, Finland and Poland. They argue the scheme involving immobilized capital is "the economically realistic and practically possible solution".

"It's a matter of destiny for us," warns leading German conservative MP Norbert Röttgen. "If we fail, I don't know what we'll do subsequently. That's why we have to succeed 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 use Russia's frozen billions for another purpose, as part of its own diplomatic proposal.

Zelensky has stated Ukraine is working with Europe and the US on a recovery fund, but he is also cognizant the US has been holding discussions with Russia about potential collaboration.

An initial document of the US peace plan referred to $100bn of Russia's frozen assets being used by the US for reconstruction, with the US {taking|receiving