Moscow Hits Back at the EU's Proposal to Lend Frozen Russian Funds to Kyiv

Ukraine is running out of financial resources to sustain its military and economy, after nearly four years of Russia's full-scale war.

In the view of European leaders, the remedy to plugging Kyiv's funding gap of €135.7bn for the coming 24 months is found in Moscow's immobilized funds held by Belgian bank Euroclear, and Brussels seek to give it the green light at their meeting in Brussels next week.

Moscow's representatives warn the EU plan would be an confiscation, and Russia's central bank stated on Friday it was initiating legal action against Euroclear in a Moscow court even before a conclusive plan is made.

'Appropriate' to Use Russia's Assets, Argue European and Ukrainian Officials

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

European and Ukrainian authorities contend that that capital should be used to reconstruct what Russia has devastated: EU officials terms it a "loan for reparations" and has come up with a plan to support Ukraine's economy valued at €90bn.

"It is only just that the assets frozen from Russia should be used to rebuild what Russia has devastated – and that money then becomes Ukraine's," states Ukrainian President Volodymyr Zelensky.

German Chancellor Friedrich Merz says the assets will "enable Ukraine to defend itself efficiently against any future Russian attacks".

The legal move by Moscow was foreseen in Brussels. But it is not only Moscow that is concerned.

Authorities in Brussels is worried it will be saddled with an enormous bill if it all goes wrong, and Euroclear chief executive Valérie Urbain argues using the assets could "undermine the international financial system".

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

Belgian Prime Minister Bart de Wever has presented the EU with a series of "rational, reasonable, and justified conditions" before he will accept 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 Plan?

European Union officials is under pressure prior to next Thursday's summit to agree on a arrangement that Belgium can accept.

Previously the EU has avoided accessing the frozen capital directly but since last year has paid the "excess income" from them to Ukraine. In 2024 that totaled €3.7bn. Legally, using the profits is seen as permissible as Russia is sanctioned and the earnings are not property of the Russian state.

But international military aid for Ukraine has fallen significantly in 2025, and Europe has struggled to cover the deficit left by the US decision to all but stop funding Ukraine under President Donald Trump.

There are currently two EU options designed to providing Ukraine with €90bn, to cover a majority 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 first choice but it needs a unanimous vote by EU leaders and that would be difficult when Hungary and Slovakia are against funding Ukraine's military.
• That leaves loaning Ukraine cash from the Moscow's immobilized capital, which were at first held in securities but have now mostly matured into cash. That funding is owned by Euroclear held in the European Central Bank.

The European Commission acknowledges Belgium has legitimate concerns and states it is confident it has resolved them.

The scheme is for Belgium to be safeguarded with a assurance covering all the €210bn of Russian assets in the EU.

Should Euroclear suffer a loss 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.

Should Russia took legal action against Belgium itself, any decision by a Russian court would not be enforced in the EU.

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

Heretofore they have had to vote by consensus every six months to continue the freeze, which could have meant a repeated risk to Belgium.

The EU ambassadors are set to use an emergency clause under Article 122 of the EU Treaties so the assets continue to be immobilized as long as an "clear risk to the financial well-being of the union" continues.

The Reasons Belgium is Remains On Board

The Belgian government is adamant it remains a staunch ally of Ukraine, but identifies juridical dangers in the plan and fears being left to handle the repercussions if things do not work out.

A usually partisan political environment in this case has come together in support of Prime Minister Bart de Wever, who is being pressured from fellow EU leaders.

"The Belgian economy is not large. Belgian GDP is approximately €565bn – think about if it would need to carry a €185bn bill," notes Veerle Colaert, professor of financial law at KU Leuven University.

While the EU might be able to obtain sufficient protections 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 grant a loan to the EU would violate EU banking regulations.

"Banks need to follow stability regulations and shouldn't concentrate risk. Now the EU is telling Euroclear to do precisely that.

"Why do we have 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 another reason why it's so vital for Belgium to obtain absolute protections for Euroclear."

EU Leaders Facing Strain from Every Direction

There is no time to lose, warn a group of EU member states including those closest to Russia such as the Baltics, Finland and Poland. They argue the scheme involving immobilized capital is "a fiscally viable and practically possible 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 subsequently. That's why we have to succeed in a week's time".

Although Russia is insistent its money should not be used, there are added concerns among European figures that the US may want to use Russia's blocked funds differently, as part of its own peace plan.

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

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