Russia Retaliates at Europe's Scheme to Loan Frozen Russian Cash to Ukraine

Kyiv remains depleting its funding to sustain its armed forces and economy afloat, after almost four years of full-scale conflict with Russia.

In the view of European leaders, the answer to addressing Ukraine's financial shortfall of €135.7bn for the coming 24 months is found in frozen Russian assets sitting in Belgian bank Euroclear, and Brussels aim to sign that off at their meeting in Brussels next week.

Russian officials caution the EU plan would be an confiscation, and Moscow's monetary authority stated on Friday it was initiating legal action against Euroclear in a Moscow court prior to a final decision is made.

'Appropriate' to Utilize Moscow's Assets, Say European and Ukrainian Officials

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

Brussels and Kyiv argue that those funds should be used to reconstruct what Russia has destroyed: The European Commission refers to it as a "reparations loan" and has proposed a plan to prop up Ukraine's economy valued at €90bn.

"It is only just that Russia's frozen assets should be used to rebuild what Russia has destroyed – and that money then becomes ours," states Ukrainian President Volodymyr Zelensky.

Chancellor Friedrich Merz argues the assets will "enable Ukraine to shield itself effectively against any future Russian attacks".

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

Belgium is worried it will be left with an huge bill if it all backfires, 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 set the EU a series of "rational, reasonable, and justified conditions" before he will accept the reparations plan, and he has not excluded legal action if it "poses significant risks" for his country.

What is the EU's Plan?

European Union officials is racing against time ahead of next Thursday's summit to come up with a compromise that Belgium can support.

So far the EU has refrained from touching the frozen capital directly but since last year has transferred the "excess income" from them to Ukraine. In 2024 that totaled €3.7bn. From a legal standpoint, using the revenue is seen as safe as Russia is subject to sanctions and the returns are not property of the Russian state.

But international military aid for Ukraine has slipped dramatically in 2025, and Europe has had trouble trying to cover the gap caused by the US decision to virtually halt funding Ukraine under President Donald Trump.

There are at the moment two EU proposals aimed at supplying Ukraine with €90bn, to finance two-thirds of its budgetary necessities.

• One is to raise the money on financial markets, guaranteed by the EU budget as a surety. This is Belgium's favored solution but it needs a agreement by all by EU leaders and that would be difficult when Hungary and Slovakia oppose funding Ukraine's military.
• This makes the other option providing a loan of Ukraine cash from the Moscow's immobilized capital, which were at first held in financial instruments but have now mostly been converted into cash. That capital is Euroclear property located within the European Central Bank.

The EU's executive recognizes Belgium has valid worries and says it is convinced it has dealt with them.

The proposal 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, that would be offset from assets belonging to Russia's own clearing house which are in the EU.

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

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

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

The EU ambassadors are planning to use an extraordinary measure under Article 122 of the EU Treaties so the assets continue to be immobilized as long as an "direct danger to the economic interests of the union" continues.

The Reasons Belgium is Still Not On Board

The Belgian government is adamant it remains a committed partner of Ukraine, but sees regulatory pitfalls in the plan and worries about being left to handle the repercussions if things do not work out.

A typically fractured political scene in this case has rallied behind Prime Minister Bart de Wever, who is facing pressure from other European officials.

"Belgium is a small economy. Belgian GDP is around €565bn – imagine if it would need to shoulder a €185bn bill," says Veerle Colaert, expert in financial law at KU Leuven University.

While the EU might be able to arrange sufficient protections for the loan itself, Belgium worries about an further exposure of being subject to extra legal costs.

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

"Banks need to follow capital and liquidity requirements and shouldn't make one enormous loan. Now the EU is telling Euroclear to do precisely that.

"Why do we have these bank rules? It's because we want banks to be secure. And if things fail it would fall to Belgium to bail out Euroclear. That's another reason why it's so vital for Belgium to get ironclad guarantees for Euroclear."

The European Union In a Difficult Position from Every Direction

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

"It's a matter of destiny for us," warns leading German conservative MP Norbert Röttgen. "If we fail, 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 unyielding its money should not be used, there are further worries among European figures that the US may want to employ Russia's blocked funds for another purpose, as part of its own peace initiative.

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

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