Moscow Retaliates at the EU's Proposal to Loan Immobilized Moscow's Cash to Ukraine

Kyiv remains facing a severe shortage of financial resources to maintain its armed forces and economy, after almost four years of the ongoing invasion by Moscow.

For Europe, the remedy to filling Ukraine's funding gap of €135.7bn for the next two years rests with assets belonging to Russia that are frozen held by Belgian bank Euroclear, and EU leaders aim to give it the green light at their EU leaders' conference next week.

Authorities in Russia warn the EU plan would be an illegal seizure, and Russia's central bank announced on Friday it was suing Euroclear in a Moscow court even before a conclusive plan is made.

'Just' to Employ Russia's Funds, Argue Ukraine and the EU

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

Brussels and Kyiv contend that that capital should be used to rebuild what Russia has devastated: The European Commission refers to it as a "reparations loan" and has proposed 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 devastated – and that that capital then becomes ours," says Ukrainian President Volodymyr Zelensky.

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

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

The Belgian government is worried it will be left with an massive bill if it all backfires, and Euroclear chief executive Valérie Urbain says using the assets could "undermine the world's financial order".

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

Belgium's PM Bart de Wever has set the EU a series of "rational, reasonable, and justified conditions" before he will accept the reconstruction loan scheme, and he has left open the possibility of legal action if it "poses significant risks" for his country.

Explaining the EU's Strategy?

The EU is working to the wire prior to next Thursday's summit to agree on a solution that Belgium can support.

So far the EU has refrained from touching the frozen capital directly but for the past year has paid the "extraordinary revenues" from them to Ukraine. In 2024 that totaled €3.7bn. Legally, using the profits is seen as permissible as Russia is under sanction and the returns are not Moscow's sovereign assets.

But global military support for Ukraine has declined sharply in 2025, and Europe has found it difficult to make up the deficit caused by the US decision to all but stop funding Ukraine under President Donald Trump.

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

• The first is to borrow the funds on the markets, guaranteed by the EU budget as a guarantee. This is Belgium's preferred option but it demands a unanimous vote by EU leaders and that would be challenging when two member states oppose funding Ukraine's military.
• The alternative is loaning Ukraine cash from the Russian assets, which were at first held in financial instruments but have now largely been converted into cash. That money is Euroclear property deposited at the European Central Bank.

The European Commission accepts Belgium has justified fears and says it is convinced it has dealt with them.

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

If Euroclear face a financial hit 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.

In the event that Russia took legal action against Belgium itself, any decision by a Russian court would not be accepted in the EU.

As an important step, EU ambassadors are expected to agree on Friday to freeze indefinitely Russia's central bank assets held in Europe permanently.

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

The EU ambassadors are planning 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 financial well-being of the union" continues.

The Reasons Belgium is Remains Convinced

Brussels is firm it remains a staunch ally of Ukraine, but perceives juridical dangers in the plan and worries about being left to handle the consequences if things fail.

A normally divided political landscape in this case has rallied behind Prime Minister Bart de Wever, who is under pressure from fellow EU leaders.

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

Although the EU might be able to secure adequate guarantees for the loan itself, Belgium worries about an added risk of being vulnerable to extra legal costs.

Prof Colaert also believes the stipulation for Euroclear to issue credit to the EU would contravene EU banking regulations.

"Lenders need to comply with capital and liquidity requirements and shouldn't concentrate risk. Now the EU is asking Euroclear to do precisely that.

"Why do we have 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 important for Belgium to obtain water-tight assurances for Euroclear."

The European Union Under Pressure from Multiple Fronts

There is no time to lose, warn a group of EU member states including those bordering Russia such as the Baltics, Finland and Poland. They maintain the frozen assets plan is "the financially feasible and politically realistic solution".

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

While Russia is adamant its money should not be touched, there are further worries among EU officials that the US may want to employ Russia's frozen billions differently, as part of its own diplomatic proposal.

Zelensky has said Ukraine is coordinating with Europe and the US on a rebuilding fund, but he is also mindful the US has been holding discussions with Russia about potential collaboration.

An early draft of the US peace plan mentioned $100bn of Russia's blocked funds being used by the US for reconstruction, with the US {taking|receiving