Russia Retaliates at the EU's Proposal to Loan Frozen Moscow's Funds to Kyiv

Ukraine is facing a severe shortage of financial resources to sustain its armed forces and economy, after nearly four years of full-scale conflict with Russia.

For Europe, the answer to addressing Kyiv's budget hole of €135.7bn for the next two years rests with frozen Russian assets located within Belgian bank Euroclear, and European Union officials seek to finalize the plan at their EU leaders' conference next week.

Authorities in Russia warn the EU plan would be an confiscation, and Moscow's monetary authority declared on Friday it was taking to court Euroclear in a Moscow court prior to a final decision is made.

'Only Fair' to Employ Moscow's Assets, Say Kyiv and Brussels

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

Brussels and Kyiv maintain that that capital should be used to rebuild what Russia has laid waste to: The European Commission refers to it as a "reparations loan" and has come up with a plan to bolster Ukraine's economy valued at €90bn.

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

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

The legal move by Moscow was anticipated in Brussels. But it is not just Moscow that is concerned.

Authorities in Brussels is worried it will be burdened by an huge bill if it all backfires, and Euroclear chief executive Valérie Urbain warns using the assets could "undermine the international financial system".

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 accept the reconstruction loan scheme, and he has refused to rule out legal action if it "carries significant risks" for his country.

Explaining the EU's Proposal?

European Union officials is under pressure prior to next Thursday's summit to come up with a arrangement that Belgium can support.

Previously the EU has refrained from accessing the frozen capital directly but for the past year has directed the "extraordinary revenues" from them to Ukraine. In 2024 that totaled €3.7bn. From a legal standpoint, using the interest is deemed safe as Russia is sanctioned and the earnings are not Moscow's sovereign assets.

But international military aid for Ukraine has slipped dramatically in 2025, and Europe has found it difficult to make up the shortfall left by the US decision to virtually halt funding Ukraine under President Donald Trump.

There are at the moment two EU plans designed to supplying Ukraine with €90bn, to cover a large portion of its financial requirements.

• The first is to borrow the funds on the markets, guaranteed by the EU budget as a collateral. This is Belgium's preferred option but it requires a unanimous vote by EU leaders and that would be difficult when Hungary and Slovakia oppose funding Ukraine's military.
• That leaves lending Ukraine cash from the frozen Russian funds, which were at first held in bonds but have now predominantly turned into cash. That funding is owned by Euroclear deposited at the European Central Bank.

Brussels' executive arm accepts Belgium has valid worries and says it is confident it has addressed them.

The scheme is for Belgium to be shielded with a guarantee applying to all the €210bn of Russian assets in the EU.

If Euroclear face a financial hit of its own assets in Russia, that would be offset from assets belonging to Russia's own clearing house which are in the EU.

Should Russia targeted Belgium itself, any ruling by a Russian court would not be accepted in the EU.

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

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

The EU ambassadors are planning 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 financial well-being of the union" continues.

Why Belgium is Still Not Convinced

The Belgian government is insistent it remains a strong supporter of Ukraine, but perceives legal risks in the plan and is concerned about being left to handle the repercussions if things go wrong.

A typically divided political landscape in this case has come together in support of Prime Minister Bart de Wever, who is under pressure from fellow EU leaders.

"The Belgian economy is not large. Belgian GDP is approximately €565bn – imagine if it would need to bear a €185bn bill," says Veerle Colaert, academic specializing in financial regulation at KU Leuven University.

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

Prof Colaert also contends the stipulation for Euroclear to grant a loan to the EU would contravene EU banking regulations.

"Lenders need to follow capital and liquidity requirements and shouldn't put all their eggs in one basket. Now the EU is instructing Euroclear to do exactly that.

"What is the purpose of these banking laws? It's because we want banks to be secure. And if things fail it would fall to Belgium to rescue Euroclear. That's another reason why it's so vital for Belgium to secure water-tight assurances for Euroclear."

The European Union Under Pressure from Every Direction

Time is of the essence, state a group of EU member states including those bordering Russia such as the Baltics, Finland and Poland. They maintain the proposal to use Russian funds is "the economically realistic and politically realistic 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 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 deploy Russia's immobilized billions in another way, as part of its own peace plan.

Zelensky has indicated 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 future co-operation.

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