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

Kyiv remains depleting its cash to maintain its military and economy, after almost four years of the ongoing invasion by Moscow.

For Europe, the solution to filling Ukraine's budget hole of €135.7bn for the coming 24 months rests with assets belonging to Russia that are frozen sitting in Belgian bank Euroclear, and EU leaders aim to sign that off at their meeting in Brussels next week.

Russian officials warn the EU plan would be an illegal seizure, and Russia's central bank declared on Friday it was taking to court Euroclear in a Moscow court ahead of a conclusive plan is made.

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

Overall, Russia has approximately €210bn of its state reserves blocked in the EU, and €185bn of that is held by Euroclear.

The EU and Ukraine maintain that that capital should be used to rebuild what Russia has destroyed: Brussels calls it a "loan for reparations" and has come up with a plan to bolster Ukraine's economy to the tune of €90bn.

"It is appropriate that Russia's frozen assets should be used to reconstruct what Russia has destroyed – and that that capital then becomes ours," remarks Ukraine's Volodymyr Zelensky.

Germany's leader Friedrich Merz says the assets will "allow Ukraine to shield itself efficiently against any future Russian attacks".

The legal move by Moscow was expected in Brussels. But it is not only Moscow that is unhappy.

The Belgian government is anxious it will be saddled with an enormous bill if it all goes wrong, and Euroclear chief executive Valérie Urbain argues using the assets could "destabilise the world's financial order".

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

Belgium's PM Bart de Wever has set the EU a series of "pragmatic, fair, and legitimate conditions" before he will endorse 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?

The EU is working to the wire before next Thursday's summit to agree on a compromise that Belgium can accept.

Previously the EU has held off using the principal funds directly but for the past year has directed the "excess income" from them to Ukraine. In 2024 that totaled €3.7bn. Legally, using the revenue is considered less risky as Russia is under sanction and the proceeds are not Russian sovereign property.

But foreign defense assistance for Ukraine has slipped dramatically in 2025, and Europe has struggled to compensate for the shortfall left by the US decision to virtually halt funding Ukraine under President Donald Trump.

There are at the moment two EU options seeking to providing Ukraine with €90bn, to cover a majority of its budgetary necessities.

• One is to secure the capital on financial markets, secured against the EU budget as a surety. This is Belgium's favored solution but it needs a agreement by all by EU leaders and that would be difficult when Budapest and Bratislava oppose funding Ukraine's military.
• That leaves loaning Ukraine cash from the frozen Russian funds, which were initially held in securities but have now largely turned into cash. That funding is owned by Euroclear located within the European Central Bank.

The EU's executive acknowledges Belgium has justified fears and says it is assured it has resolved them.

The scheme is for Belgium to be safeguarded with a insurance 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 judgment by a Russian court would not be enforced in the EU.

In a significant move, EU ambassadors are expected to agree on Friday to immobilise Russia's central bank assets held in Europe for the foreseeable future.

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

The EU ambassadors are set to use an extraordinary measure under Article 122 of the EU Treaties so the assets remain frozen as long as an "immediate threat to the financial well-being of the union" continues.

Why Belgium is Not Yet Convinced

Brussels is firm it remains a staunch ally of Ukraine, but identifies regulatory pitfalls in the plan and worries about being forced to deal with the consequences if things fail.

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

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

While the EU might be able to secure adequate protections for the loan itself, Belgium is concerned about an additional danger of being vulnerable to extra legal costs.

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

"Financial institutions need to comply with capital and liquidity requirements and shouldn't make one enormous loan. Now the EU is instructing Euroclear to do just that.

"What is the purpose of these bank rules? It's because we want banks to be secure. And if things fail it would become the responsibility of Belgium to bail out Euroclear. That's a further cause why it's so vital for Belgium to secure water-tight protections for Euroclear."

The European Union In a Difficult Position from Multiple Fronts

The situation is urgent, caution several EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They believe the proposal to use Russian funds is "the financially feasible and politically achievable solution".

"It's a matter of destiny for us," states leading German conservative MP Norbert Röttgen. "Should we not succeed, 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 accessed, there are additional apprehensions among leaders in Europe that the US may want to deploy Russia's frozen billions differently, as part of its own diplomatic proposal.

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

A preliminary version of the US peace plan referred to $100bn of Russia's immobilized capital being used by the US for reconstruction, with the US {taking|receiving