Moscow Hits Back at Europe's Plan to Loan Frozen Russian Funds to Kyiv

Ukraine is facing a severe shortage of funding to keep going its armed forces and economy, after nearly four years of Russia's full-scale war.

In the view of European leaders, the solution to addressing Ukraine's funding gap of €135.7bn for the following biennium rests with assets belonging to Russia that are frozen sitting in Belgian bank Euroclear, and Brussels seek to sign that off at their Brussels summit next week.

Authorities in Russia warn the EU plan would be an confiscation, and the Central Bank of Russia announced on Friday it was initiating legal action against Euroclear in a Moscow court even before a conclusive plan is made.

'Just' to Utilize Moscow's Assets, Argue Kyiv and Brussels

All told, Russia has about €210bn of its state reserves blocked in the EU, and €185bn of that is managed by Euroclear.

Brussels and Kyiv contend that money should be used to rebuild what Russia has devastated: Brussels refers to it as a "loan for reparations" and has devised a plan to support Ukraine's economy valued at €90bn.

"It is only just that Moscow's blocked funds should be used to reconstruct what Russia has destroyed – and that money then becomes ours," says Ukrainian President Volodymyr Zelensky.

German Chancellor Friedrich Merz argues the assets will "allow Ukraine to defend itself successfully against any future Russian attacks".

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

The Belgian government is anxious it will be burdened by an huge bill if it all goes wrong, and Euroclear CEO Valérie Urbain says using the assets could "disrupt the world's financial order".

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

Belgian Prime Minister Bart de Wever has given Brussels a series of "logical, sensible, and warranted conditions" before he will accept the reparations plan, and he has refused to rule out legal action if it "presents significant risks" for his country.

The Details of the EU's Strategy?

European Union officials is racing against time prior to next Thursday's summit to finalize a solution that Belgium can support.

Until now the EU has avoided accessing the principal funds directly but since last year has transferred the "excess income" from them to Ukraine. In 2024 that totaled €3.7bn. Juridically, using the revenue is considered permissible as Russia is under sanction and the returns are not property of the Russian state.

But global military support for Ukraine has slipped dramatically in 2025, and Europe has had trouble trying to make up the deficit resulting from the US decision to all but stop funding Ukraine under President Donald Trump.

There are currently two EU plans seeking to furnishing Ukraine with €90bn, to pay for a majority of its funding needs.

• One is to raise the money on financial markets, guaranteed by the EU budget as a collateral. This is Belgium's favored solution but it demands a agreement by all by EU leaders and that would be challenging when Budapest and Bratislava oppose funding Ukraine's military.
• That leaves loaning Ukraine cash from the Russian assets, which were originally held in securities but have now predominantly turned into cash. That money is an asset of Euroclear held in the European Central Bank.

The European Commission accepts Belgium has justified fears and states it is confident it has addressed them.

The plan is for Belgium to be safeguarded with a guarantee applying to 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.

Should Russia took legal action against Belgium itself, any decision by a Russian court would not be recognized in the EU.

In a key development, EU ambassadors are expected to agree on Friday to freeze indefinitely Russia's central bank assets held in Europe indefinitely.

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

The EU ambassadors are expected to use an special provision under Article 122 of the EU Treaties so the assets remain frozen as long as an "direct danger to the economic security of the union" continues.

Why Belgium is Remains Convinced

The Belgian government is insistent it remains a strong supporter of Ukraine, but sees regulatory pitfalls in the plan and is concerned about being shouldering the consequences if things fail.

A normally divided political landscape in this case has come together in support of Prime Minister Bart de Wever, who is under pressure from other European officials.

"The Belgian economy is not large. Belgian GDP is about €565bn – imagine if it would need to bear a €185bn bill," notes Veerle Colaert, professor of financial law at KU Leuven University.

Although the EU might be able to secure sufficient protections for the loan itself, Belgium is concerned about an added risk of being subject to extra fines or liabilities.

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

"Banks need to comply with capital and liquidity requirements and shouldn't put all their eggs in one basket. Now the EU is instructing Euroclear to do just that.

"What is the purpose of these banking laws? It's because we want banks to be stable. And if things go wrong it would be up to Belgium to rescue Euroclear. That's a further cause why it's so important for Belgium to obtain ironclad guarantees for Euroclear."

EU Leaders In a Difficult Position from Every Direction

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

"It is a decisive moment for us," says leading German conservative MP Norbert Röttgen. "If the plan collapses, I don't know what we'll do next. That's why we have to reach an agreement in a week's time".

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

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

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