Moscow Retaliates at the EU's Plan to Lend Frozen Russian Cash to Ukraine

Ukraine is running out of financial resources to maintain its armed forces and economy, after almost four years of Russia's full-scale war.

For Europe, the solution to filling Ukraine's budget hole of €135.7bn for the next two years lies in assets belonging to Russia that are frozen located within Belgian bank Euroclear, and EU leaders aim to sign that off at their EU leaders' conference next week.

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

'Appropriate' to Use Russia's Assets, Say Kyiv and Brussels

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

European and Ukrainian authorities contend that that capital should be used to restore what Russia has destroyed: EU officials terms it a "reparations loan" and has devised a plan to bolster Ukraine's economy valued at €90bn.

"It's only fair that Russia's frozen assets should be used to rebuild what Russia has destroyed – and that those funds then becomes Ukraine's," states Ukraine's Volodymyr Zelensky.

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

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

Belgium is concerned it will be burdened by an huge bill if it all goes wrong, and Euroclear CEO Valérie Urbain warns using the assets could "disrupt the world's financial order".

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

The leader of Belgium Bart de Wever has set the EU a series of "pragmatic, fair, and legitimate conditions" before he will endorse the reconstruction loan scheme, and he has refused to rule out legal action if it "presents significant risks" for his country.

Explaining the EU's Strategy?

Brussels is working to the wire before next Thursday's summit to come up with a solution that Belgium can agree to.

So far the EU has refrained from accessing the principal funds directly but starting in 2024 has paid the "windfall profits" from them to Ukraine. In 2024 that amounted to €3.7bn. From a legal standpoint, using the revenue is deemed permissible as Russia is sanctioned and the proceeds are not Russian sovereign property.

But global military support for Ukraine has declined sharply in 2025, and Europe has found it difficult to cover the deficit left by the US decision to largely cease funding Ukraine under President Donald Trump.

There are at the moment two EU options designed to providing Ukraine with €90bn, to finance two-thirds of its budgetary necessities.

• One is to borrow the funds on financial markets, backed by the EU budget as a collateral. This is Belgium's preferred option but it requires a consensus by EU leaders and that would be problematic when Hungary and Slovakia oppose funding Ukraine's military.
• That leaves lending Ukraine cash from the frozen Russian funds, which were originally held in securities but have now largely matured into cash. That capital is owned by Euroclear located within the European Central Bank.

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

The proposal is for Belgium to be protected with a assurance covering all the €210bn of Russian assets in the EU.

Should 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 targeted Belgium itself, any decision by a Russian court would not be recognized 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 permanently.

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

The EU ambassadors are expected to use an extraordinary measure under Article 122 of the EU Treaties so the assets stay blocked as long as an "clear risk to the economic security of the union" continues.

Why Belgium is Still Not Convinced

Belgium is adamant it remains a strong supporter of Ukraine, but sees juridical dangers in the plan and is concerned about being left to handle the consequences if things do not work out.

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

"Belgium has a modest-sized economy. Belgian GDP is about €565bn – consider if it would need to carry a €185bn bill," notes Veerle Colaert, academic specializing in financial regulation at KU Leuven University.

While the EU might be able to obtain enough guarantees for the loan itself, Belgium fears an further exposure of being vulnerable to extra legal costs.

Prof Colaert also believes the requirement for Euroclear to issue credit to the EU would violate EU banking regulations.

"Banks need to adhere to prudential rules and shouldn't make one enormous loan. Now the EU is telling Euroclear to do just that.

"Why do we have these financial regulations? It's because we want banks to be solvent. And if things go wrong it would fall to Belgium to save Euroclear. That's an additional reason why it's so important for Belgium to secure water-tight protections for Euroclear."

The European Union Facing Strain from Multiple Fronts

There is no time to lose, warn a group of EU member states including those bordering Russia such as the Baltics, Finland and Poland. They believe the scheme involving immobilized capital is "a fiscally viable and politically achievable solution".

"It's a matter of destiny for us," states 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 reach an agreement in a week's time".

While Russia is unyielding its money should not be accessed, there are further worries among leaders in Europe that the US may want to use Russia's immobilized billions differently, 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 aware the US has been talking to Russia about possible partnership.

A preliminary version of the US peace plan suggested $100bn of Russia's blocked funds being used by the US for reconstruction, with the US {taking|receiving