Russia Retaliates at Europe's Proposal to Lend Immobilized Moscow's Funds to Kyiv

Kyiv remains facing a severe shortage of financial resources to keep going its armed forces and economy afloat, after nearly four years of the ongoing invasion by Moscow.

From the EU's perspective, the answer to filling Ukraine's funding gap of €135.7bn for the following biennium is found in frozen Russian assets located within Belgian bank Euroclear, and European Union officials seek to give it the green light at their EU leaders' conference next week.

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

'Only Fair' to Use Moscow's Assets, Assert Ukraine and the EU

In total, Russia has roughly €210bn of its assets blocked in the EU, and €185bn of that is held by Euroclear.

European and Ukrainian authorities argue that money should be used to restore what Russia has laid waste to: Brussels terms it a "reparations loan" and has devised a plan to support Ukraine's economy valued at €90bn.

"It is only just that Russia's frozen assets should be used to reconstruct what Russia has devastated – and that those funds then becomes Ukraine's," states Ukraine's Volodymyr Zelensky.

German Chancellor Friedrich Merz says the assets will "allow Ukraine to shield itself efficiently against any future Russian attacks".

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

Belgium is worried it will be burdened by an huge bill if it all fails, and Euroclear head Valérie Urbain argues using the assets could "disrupt the international financial system".

Euroclear also has an estimated €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 agree to the reconstruction loan scheme, and he has refused to rule out legal action if it "poses significant risks" for his country.

What is the EU's Strategy?

European Union officials is working to the wire prior to next Thursday's summit to come up with a compromise that Belgium can accept.

Previously the EU has refrained from using the frozen capital directly but starting in 2024 has paid the "windfall profits" from them to Ukraine. In 2024 that totaled €3.7bn. Legally, using the interest is seen as permissible as Russia is subject to sanctions and the proceeds are not Russian sovereign property.

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

There are presently two EU proposals seeking to providing Ukraine with €90bn, to finance a large portion of its financial requirements.

• One is to raise the money on the markets, backed by the EU budget as a guarantee. This is Belgium's first choice but it requires a unanimous vote by EU leaders and that would be challenging when Budapest and Bratislava oppose funding Ukraine's military.
• That leaves lending Ukraine cash from the Moscow's immobilized capital, which were at first held in financial instruments but have now largely matured into cash. That funding is owned by Euroclear deposited at the European Central Bank.

The European Commission acknowledges Belgium has justified fears and says it is confident it has dealt with them.

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

Should 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.

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

As an important step, EU ambassadors are set to approve on Friday to immobilise Russia's central bank assets held in Europe indefinitely.

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

The EU ambassadors are planning to use an emergency clause under Article 122 of the EU Treaties so the assets continue to be immobilized as long as an "clear risk to the economic interests of the union" continues.

Why Belgium is Not Yet On Board

Brussels is firm it remains a strong supporter of Ukraine, but sees legal risks in the plan and worries about being forced to deal with the consequences if things do not work out.

A usually fractured political scene in this case has come together in support of Prime Minister Bart de Wever, who is facing pressure from other European officials.

"Belgium is a small economy. Belgian GDP is approximately €565bn – consider if it would need to carry a €185bn bill," notes Veerle Colaert, expert in financial law at KU Leuven University.

Although the EU might be able to obtain adequate protections for the loan itself, Belgium is concerned about an further exposure of being subject to extra fines or liabilities.

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

"Lenders need to follow prudential rules and shouldn't concentrate risk. Now the EU is asking Euroclear to do precisely that.

"What is the purpose of these banking laws? It's because we want banks to be secure. And if things turn sour it would be up to Belgium to rescue Euroclear. That's an additional reason why it's so important for Belgium to get ironclad assurances for Euroclear."

Europe Under Pressure from All Sides

Time is of the essence, caution a group of EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They believe the scheme involving immobilized capital is "a financially feasible and politically realistic solution".

"It's a matter of destiny for us," warns leading German conservative MP Norbert Röttgen. "If the plan collapses, I don't know what we'll do subsequently. That's why we have to finalize the deal in a week's time".

Although Russia is insistent its money should not be used, there are additional apprehensions among EU officials that the US may want to deploy Russia's immobilized billions for another purpose, as part of its own peace initiative.

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

An initial document of the US peace plan suggested $100bn of Russia's immobilized capital being used by the US for reconstruction, with the US {taking|receiving