Russia Hits Back at Europe's Plan to Loan Immobilized Moscow's Funds to Ukraine

Kyiv remains facing a severe shortage of funding to sustain its military and economy afloat, after almost four years of Russia's full-scale war.

From the EU's perspective, the answer to addressing Kyiv's budget hole of €135.7bn for the coming 24 months is found in frozen Russian assets located within Belgian bank Euroclear, and European Union officials seek to sign that off at their meeting in Brussels next week.

Russian officials warn the EU plan would be an confiscation, and the Central Bank of Russia stated on Friday it was initiating legal action against Euroclear in a Moscow court prior to a conclusive plan is made.

'Only Fair' to Use Moscow's Funds, Assert Ukraine and the EU

Overall, Russia has roughly €210bn of its funds frozen in the EU, and €185bn of that is managed by Euroclear.

Brussels and Kyiv argue that money should be used to restore what Russia has destroyed: EU officials calls it a "reconstruction loan" and has devised a plan to support Ukraine's economy amounting to €90bn.

"It's only fair that Moscow's blocked funds should be used to reconstruct what Russia has destroyed – and that money then becomes ours," remarks Ukraine's Volodymyr Zelensky.

Chancellor Friedrich Merz says the assets will "allow Ukraine to shield itself effectively against subsequent Russian attacks".

Moscow's lawsuit was anticipated in Brussels. But it is not only Moscow that is unhappy.

Belgium is worried it will be burdened by an massive bill if it all backfires, and Euroclear CEO Valérie Urbain argues using the assets could "disrupt the world's financial order".

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

Belgian Prime Minister Bart de Wever has presented the EU with a series of "rational, reasonable, and justified conditions" before he will agree to the reconstruction loan scheme, and he has refused to rule out legal action if it "poses significant risks" for his country.

The Details of the EU's Strategy?

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

Until now the EU has refrained from using the frozen capital directly but for the past year has paid the "windfall profits" from them to Ukraine. In 2024 that was €3.7bn. From a legal standpoint, using the interest is seen as permissible as Russia is subject to sanctions and the returns are not property of the Russian state.

But international military aid for Ukraine has declined sharply in 2025, and Europe has had trouble trying to compensate for the deficit resulting from the US decision to virtually halt funding Ukraine under President Donald Trump.

There are currently two EU options designed to providing Ukraine with €90bn, to pay for a majority of its budgetary necessities.

• The first is to borrow the funds on financial markets, backed by the EU budget as a guarantee. This is Belgium's first choice but it demands a unanimous vote by EU leaders and that would be problematic when two member states are against funding Ukraine's military.
• This makes the other option lending Ukraine cash from the Moscow's immobilized capital, which were at first held in bonds but have now largely matured into cash. That money is Euroclear property held in the European Central Bank.

The EU's executive 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 insurance encompassing 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 clearing house which are in the EU.

If Russia went after Belgium itself, any ruling by a Russian court would not be accepted in the EU.

In a key development, EU ambassadors are set to approve on Friday to permanently block Russia's central bank assets held in Europe indefinitely.

Previously they have had to vote by consensus every six months to continue the freeze, which could have meant a ongoing 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 security of the union" continues.

Why Belgium is Not Yet Satisfied

The Belgian government is adamant it remains a staunch ally of Ukraine, but identifies legal risks in the plan and is concerned about being left to handle the consequences if things go wrong.

A normally fractured political scene in this case has rallied behind Prime Minister Bart de Wever, who is facing pressure from fellow EU leaders.

"Belgium has a modest-sized economy. Belgian GDP is around €565bn – consider if it would need to bear a €185bn bill," comments Veerle Colaert, expert in financial law at KU Leuven University.

Although the EU might be able to secure enough assurances for the loan itself, Belgium fears an additional danger of being exposed to extra damages or penalties.

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

"Lenders need to adhere to prudential rules 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 secure. And if things fail it would be up to Belgium to rescue Euroclear. That's a further cause why it's so vital for Belgium to get ironclad protections for Euroclear."

Europe Facing Strain from All Sides

There is no time to lose, state several EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They believe the scheme involving immobilized capital is "the most fiscally viable and practically possible solution".

"It is a decisive moment for us," warns 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 reach an agreement 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 for another purpose, as part of its own peace plan.

Zelensky has stated Ukraine is in discussions with Europe and the US on a reconstruction fund, but he is also aware the US has been engaging with Russia about possible partnership.

An initial document of the US peace plan suggested $100bn of Russia's immobilized capital being used by the US for reconstruction, with the US {taking|receiving