Russia Retaliates at Europe's Proposal to Loan Frozen Moscow's Cash to Ukraine

Kyiv remains depleting its funding to maintain its military and economy afloat, after nearly four years of full-scale conflict with Russia.

In the view of European leaders, the solution to filling Kyiv's budget hole of €135.7bn for the following biennium lies in Moscow's immobilized funds located within Belgian bank Euroclear, and Brussels seek to give it the green light at their meeting in Brussels next week.

Authorities in Russia state the EU plan would be an illegal seizure, and Russia's central bank stated on Friday it was suing Euroclear in a Moscow court even before a final decision is made.

'Appropriate' to Utilize Moscow's Assets, Assert Kyiv and Brussels

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

Brussels and Kyiv contend that those funds should be used to restore what Russia has devastated: Brussels refers to it as a "reparations loan" and has come up with a plan to prop up Ukraine's economy amounting to €90bn.

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

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

Moscow's lawsuit was expected in Brussels. But it is not only Moscow that is unhappy.

The Belgian government is worried it will be left with an enormous bill if it all goes wrong, and Euroclear CEO Valérie Urbain argues using the assets could "undermine the global financial architecture".

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

Belgium's PM Bart de Wever has presented the EU with a series of "logical, sensible, and warranted conditions" before he will agree to the reparations plan, and he has refused to rule out legal action if it "presents significant risks" for his country.

What is the EU's Strategy?

European Union officials is working to the wire before next Thursday's summit to agree on a solution that Belgium can accept.

Until now the EU has refrained from touching the frozen capital directly but for the past year has transferred the "extraordinary revenues" from them to Ukraine. In 2024 that totaled €3.7bn. Juridically, using the revenue is seen as permissible as Russia is sanctioned and the earnings are not Russian sovereign property.

But global military support for Ukraine has declined sharply in 2025, and Europe has found it difficult to make up the shortfall resulting from the US decision to largely cease funding Ukraine under President Donald Trump.

There are currently two EU plans aimed at providing Ukraine with €90bn, to pay for a majority of its financial requirements.

• Option one is to secure the capital on the markets, backed by the EU budget as a surety. This is Belgium's favored solution but it requires a unanimous vote by EU leaders and that would be challenging when Budapest and Bratislava oppose funding Ukraine's military.
• The alternative is loaning Ukraine cash from the frozen Russian funds, which were originally held in bonds but have now predominantly turned into cash. That money is owned by Euroclear deposited at the European Central Bank.

The EU's executive accepts Belgium has legitimate concerns and claims it is convinced it has resolved them.

The plan is for Belgium to be safeguarded with a guarantee covering all the €210bn of Russian assets in the EU.

If Euroclear face a financial hit 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.

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

In a key development, 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 unanimously 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 stay blocked as long as an "immediate threat to the economic security of the union" continues.

Why Belgium is Remains Convinced

Brussels is adamant it remains a strong supporter of Ukraine, but perceives juridical dangers in the plan and fears being forced to deal with the fallout if things go wrong.

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

"Belgium is a small economy. Belgian GDP is about €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 arrange enough assurances for the loan itself, Belgium fears an added risk of being vulnerable to extra damages or penalties.

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

"Financial institutions need to adhere to capital and liquidity requirements and shouldn't put all their eggs in one basket. 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 go wrong it would fall to Belgium to save Euroclear. That's an additional reason why it's so vital for Belgium to get ironclad assurances for Euroclear."

EU Leaders Facing Strain from Every Direction

Time is of the essence, state seven EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They maintain the proposal to use Russian funds is "a financially feasible and practically possible solution".

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

Although Russia is insistent its money should not be used, there are additional apprehensions among leaders in Europe that the US may want to employ Russia's immobilized billions in another way, as part of its own peace plan.

Zelensky has stated Ukraine is working with Europe and the US on a reconstruction fund, but he is also cognizant the US has been engaging with Russia about future co-operation.

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