Russia Retaliates at the EU's Plan to Lend Frozen Moscow's Funds to Kyiv

Kyiv remains depleting its financial resources to maintain its armed forces and economy, after close to 48 months of Russia's full-scale war.

In the view of European leaders, the remedy to filling Kyiv's funding gap of €135.7bn for the coming 24 months is found in Moscow's immobilized funds sitting in Belgian bank Euroclear, and EU leaders hope to sign that off at their Brussels summit next week.

Russian officials caution the EU plan would be an act of theft, and Russia's central bank stated on Friday it was initiating legal action against Euroclear in a Moscow court prior to a final decision is made.

'Only Fair' to Use Moscow's Assets, Say Ukraine and the EU

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

European and Ukrainian authorities argue that money should be used to restore what Russia has laid waste to: Brussels calls it a "reparations loan" and has proposed a plan to prop up Ukraine's economy to the tune of €90bn.

"It is appropriate that the assets frozen from Russia should be used to rebuild what Russia has devastated – and that those funds then becomes Ukraine's," says Ukraine's Volodymyr Zelensky.

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

Moscow's lawsuit was foreseen in Brussels. But it is not only Moscow that is dissatisfied.

The Belgian government is concerned it will be saddled with an huge bill if it all goes wrong, and Euroclear head Valérie Urbain argues using the assets could "undermine the international financial system".

Euroclear also has an estimated €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 accept the reparations plan, and he has left open the possibility of legal action if it "poses significant risks" for his country.

What is the EU's Proposal?

European Union officials is racing against time prior to next Thursday's summit to finalize a compromise that Belgium can support.

Until now the EU has refrained from touching the assets themselves directly but for the past year has transferred the "windfall profits" from them to Ukraine. In 2024 that amounted to €3.7bn. Legally, using the interest is considered less risky as Russia is subject to sanctions and the proceeds are not Russian sovereign property.

But international military aid for Ukraine has slipped dramatically in 2025, and Europe has had trouble trying to compensate for the deficit caused by the US decision to all but stop funding Ukraine under President Donald Trump.

There are at the moment two EU plans seeking to supplying Ukraine with €90bn, to finance two-thirds of its funding needs.

• The first is to secure the capital on the markets, guaranteed by the EU budget as a surety. This is Belgium's preferred option but it requires a consensus by EU leaders and that would be problematic when Budapest and Bratislava are against funding Ukraine's military.
• The alternative is loaning Ukraine cash from the frozen Russian funds, which were originally held in securities but have now largely matured into cash. That money is an asset of Euroclear held in the European Central Bank.

Brussels' executive arm acknowledges Belgium has valid worries and states it is assured it has addressed them.

The plan is for Belgium to be protected with a guarantee covering 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.

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

As an important step, EU ambassadors are poised to endorse on Friday to permanently block Russia's central bank assets held in Europe for the foreseeable future.

Heretofore they have had to vote all together every six months to renew the freeze, which could have meant a ongoing risk to Belgium.

The EU ambassadors are planning 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 economic interests of the union" continues.

Why Belgium is Remains On Board

Brussels is insistent it remains a strong supporter of Ukraine, but sees regulatory pitfalls in the plan and is concerned about being left to handle the fallout if things go wrong.

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

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

While the EU might be able to arrange sufficient protections for the loan itself, Belgium fears an added risk of being vulnerable to extra legal costs.

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

"Financial institutions need to adhere to stability regulations and shouldn't concentrate risk. Now the EU is asking Euroclear to do just that.

"Why do we have these bank rules? It's because we want banks to be secure. And if things fail it would fall to Belgium to save Euroclear. That's an additional reason why it's so important for Belgium to obtain ironclad guarantees for Euroclear."

EU Leaders Under Pressure from Multiple Fronts

Time is of the essence, state seven EU member states including those closest to Russia such as the Baltics, Finland and Poland. They believe the proposal to use Russian funds is "a economically realistic and politically achievable 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 subsequently. That's why we have to reach an agreement in a week's time".

Although Russia is unyielding its money should not be accessed, there are further worries among EU officials that the US may want to employ Russia's blocked funds in another way, as part of its own diplomatic proposal.

Zelensky has indicated Ukraine is working with Europe and the US on a reconstruction fund, but he is also cognizant the US has been talking to Russia about possible partnership.

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