Moscow Retaliates at Europe's Scheme to Lend Frozen Russian Funds to Kyiv

Kyiv remains depleting its funding to sustain its military and economy, after nearly four years of the ongoing invasion by Moscow.

From the EU's perspective, the remedy to filling Kyiv's financial shortfall of €135.7bn for the following biennium rests with frozen Russian assets held by Belgian bank Euroclear, and European Union officials hope to finalize the plan at their Brussels summit next week.

Authorities in Russia state the EU plan would be an act of theft, and Russia's central bank declared on Friday it was suing Euroclear in a Moscow court even before a conclusive plan is made.

'Just' to Use Moscow's Assets, Argue European and Ukrainian Officials

In total, Russia has about €210bn of its state reserves immobilized in the EU, and €185bn of that is held by Euroclear.

The EU and Ukraine argue that money should be used to reconstruct what Russia has devastated: The European Commission calls it a "loan for reparations" and has proposed a plan to support Ukraine's economy valued at €90bn.

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

Chancellor Friedrich Merz argues the assets will "help Ukraine to protect itself efficiently against any future Russian attacks".

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

The Belgian government is anxious it will be burdened by an massive bill if it all fails, and Euroclear chief executive Valérie Urbain argues using the assets could "destabilise the world's financial order".

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

Belgian Prime Minister Bart de Wever has set the EU a series of "logical, sensible, and warranted conditions" before he will endorse the reparations plan, and he has not excluded legal action if it "presents significant risks" for his country.

Explaining the EU's Proposal?

Brussels is racing against time prior to next Thursday's summit to finalize a arrangement that Belgium can accept.

So far the EU has avoided accessing the assets themselves directly but starting in 2024 has directed the "excess income" from them to Ukraine. In 2024 that totaled €3.7bn. Legally, using the profits is seen as less risky as Russia is under sanction and the earnings are not Russian sovereign property.

But foreign defense assistance for Ukraine has declined sharply in 2025, and Europe has struggled to make up the shortfall caused by the US decision to virtually halt funding Ukraine under President Donald Trump.

There are at the moment two EU proposals aimed at furnishing Ukraine with €90bn, to finance a majority of its funding needs.

• The first is to borrow the funds on the markets, backed by the EU budget as a collateral. This is Belgium's favored solution but it requires a consensus by EU leaders and that would be difficult when Budapest and Bratislava are against funding Ukraine's military.
• That leaves providing a loan of Ukraine cash from the frozen Russian funds, which were at first held in securities but have now mostly turned into cash. That capital is owned by Euroclear deposited at the European Central Bank.

Brussels' executive arm recognizes Belgium has justified fears and says it is convinced it has dealt with them.

The scheme is for Belgium to be shielded with a guarantee 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 clearing house which are in the EU.

In the event that Russia targeted Belgium itself, any judgment by a Russian court would not be enforced in the EU.

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

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

The EU ambassadors are expected to use an special provision under Article 122 of the EU Treaties so the assets stay blocked as long as an "direct danger to the financial well-being of the union" continues.

The Reasons Belgium is Still Not On Board

Brussels is insistent it remains a strong supporter of Ukraine, but identifies juridical dangers in the plan and fears being forced to deal with the repercussions if things fail.

A usually partisan political environment in this case has united behind Prime Minister Bart de Wever, who is facing pressure from European colleagues.

"Belgium has a modest-sized economy. Belgian GDP is around €565bn – think about if it would need to carry a €185bn bill," says Veerle Colaert, expert in financial law at KU Leuven University.

While the EU might be able to arrange adequate protections for the loan itself, Belgium worries about an added risk of being subject to extra fines or liabilities.

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

"Financial institutions need to adhere to prudential rules and shouldn't concentrate risk. Now the EU is instructing Euroclear to do precisely that.

"Why do we have these banking laws? It's because we want banks to be secure. And if things fail it would fall to Belgium to bail out Euroclear. That's a further cause why it's so important for Belgium to secure ironclad protections for Euroclear."

EU Leaders Under Pressure from All Sides

The situation is urgent, caution a group of EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They believe the frozen assets plan is "the most economically realistic and practically possible solution".

"It's a matter of destiny for us," says leading German conservative MP Norbert Röttgen. "If we fail, I don't know what we'll do afterwards. That's why we have to succeed in a week's time".

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

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

A preliminary version 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