Moscow Hits Back at the EU's Plan to Loan Frozen Russian Funds to Ukraine

Kyiv remains facing a severe shortage of financial resources to maintain its armed forces and economy, after almost four years of full-scale conflict with Russia.

In the view of European leaders, the answer to addressing Ukraine's budget hole of €135.7bn for the next two years is found in frozen Russian assets located within Belgian bank Euroclear, and European Union officials aim to give it the green light at their meeting in Brussels next week.

Authorities in Russia caution the EU plan would be an illegal seizure, and the Central Bank of Russia stated on Friday it was suing Euroclear in a Moscow court even before a conclusive plan is made.

'Only Fair' to Utilize Moscow'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 maintain that those funds should be used to reconstruct what Russia has laid waste to: EU officials terms it a "loan for reparations" and has proposed a plan to prop up Ukraine's economy valued at €90bn.

"It is appropriate that Russia's frozen assets should be used to rebuild what Russia has devastated – and that that capital then becomes Ukraine's," states Ukraine's Volodymyr Zelensky.

German Chancellor Friedrich Merz states the assets will "enable Ukraine to shield itself effectively against subsequent Russian attacks".

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

The Belgian government is worried it will be saddled with an massive bill if it all fails, and Euroclear CEO Valérie Urbain says using the assets could "destabilise the world's financial order".

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

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

The Details of the EU's Plan?

European Union officials is under pressure ahead of next Thursday's summit to finalize a arrangement that Belgium can agree to.

Until now the EU has refrained from accessing the principal funds directly but since last year has directed the "extraordinary revenues" from them to Ukraine. In 2024 that totaled €3.7bn. Juridically, using the interest is seen as less risky as Russia is subject to sanctions and the earnings are not property of the Russian state.

But international military aid for Ukraine has declined sharply in 2025, and Europe has struggled to make up the deficit left by the US decision to virtually halt funding Ukraine under President Donald Trump.

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

• Option one is to borrow the funds on financial markets, guaranteed by the EU budget as a guarantee. This is Belgium's first choice but it demands a consensus by EU leaders and that would be problematic when Budapest and Bratislava oppose funding Ukraine's military.
• This makes the other option loaning Ukraine cash from the Russian assets, which were at first held in securities but have now predominantly matured into cash. That funding is owned by Euroclear held in the European Central Bank.

Brussels' executive arm accepts Belgium has legitimate concerns and claims it is assured it has addressed them.

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

If Euroclear suffer a loss of its own assets in Russia, the loss would be compensated from assets belonging to Russia's own settlement agency which are in the EU.

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

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

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

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

Why Belgium is Still Not Convinced

Brussels is firm it remains a committed partner of Ukraine, but perceives juridical dangers in the plan and worries about being left to handle the repercussions if things do not work out.

A typically divided political landscape in this case has united behind Prime Minister Bart de Wever, who is under pressure from European colleagues.

"Belgium has a modest-sized economy. Belgian GDP is approximately €565bn – think about if it would need to shoulder a €185bn bill," says Veerle Colaert, academic specializing in financial regulation at KU Leuven University.

While the EU might be able to arrange sufficient assurances for the loan itself, Belgium worries about an added risk of being subject to extra damages or penalties.

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

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

"What is the purpose of these financial regulations? It's because we want banks to be stable. And if things fail it would be up to Belgium to save Euroclear. That's a further cause why it's so crucial for Belgium to get absolute guarantees for Euroclear."

Europe In a Difficult Position from Multiple Fronts

Time is of the essence, warn seven EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They argue the scheme involving immobilized capital is "the economically realistic and politically achievable solution".

"This is a crucial test for us," warns leading German conservative MP Norbert Röttgen. "If we fail, I don't know what we'll do afterwards. That's why we have to finalize the deal in a week's time".

Although Russia is adamant its money should not be touched, there are additional apprehensions among European figures that the US may want to use Russia's blocked funds in another way, as part of its own diplomatic proposal.

Zelensky has said Ukraine is coordinating with Europe and the US on a recovery fund, but he is also mindful the US has been engaging with Russia about future co-operation.

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