Moscow Retaliates at the EU's Proposal to Lend Immobilized Russian Funds to Ukraine

Kyiv remains facing a severe shortage of cash to sustain its military and economy afloat, after nearly four years of full-scale conflict with Russia.

For Europe, the answer to plugging Kyiv's budget hole of €135.7bn for the next two years rests with Moscow's immobilized funds sitting in Belgian bank Euroclear, and EU leaders aim to sign that off at their meeting in Brussels next week.

Moscow's representatives warn the EU plan would be an confiscation, and Moscow's monetary authority stated on Friday it was taking to court Euroclear in a Moscow court prior to a final decision is made.

'Only Fair' to Employ Russia's Funds, Say European and Ukrainian Officials

In total, Russia has roughly €210bn of its funds frozen in the EU, and €185bn of that is managed by Euroclear.

The EU and Ukraine maintain that those funds should be used to rebuild what Russia has destroyed: Brussels terms it a "reconstruction loan" and has proposed a plan to support 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 that capital then becomes ours," says Ukrainian President Volodymyr Zelensky.

Chancellor Friedrich Merz states the assets will "enable Ukraine to defend itself efficiently against future Russian attacks".

The legal move by Moscow was expected in Brussels. But it is not just Moscow that is concerned.

Belgium is concerned it will be burdened by an enormous bill if it all backfires, and Euroclear chief executive Valérie Urbain argues using the assets could "undermine the world's financial order".

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

Belgian Prime Minister Bart de Wever has presented the EU with a series of "pragmatic, fair, and legitimate conditions" before he will accept the reconstruction loan scheme, and he has left open the possibility of legal action if it "poses significant risks" for his country.

The Details of the EU's Proposal?

European Union officials is working to the wire prior to next Thursday's summit to finalize a compromise that Belgium can support.

Until now the EU has avoided touching the frozen capital directly but since last year has paid the "windfall profits" from them to Ukraine. In 2024 that amounted to €3.7bn. From a legal standpoint, using the revenue is seen as safe as Russia is subject to sanctions and the returns are not Moscow's sovereign assets.

But global military support for Ukraine has slipped dramatically in 2025, and Europe has found it difficult to compensate for the deficit caused by the US decision to all but stop funding Ukraine under President Donald Trump.

There are presently two EU options seeking to supplying Ukraine with €90bn, to finance a majority of its financial requirements.

• Option one is to raise the money on capital markets, secured against the EU budget as a collateral. This is Belgium's preferred option but it needs a agreement by all by EU leaders and that would be challenging when Budapest and Bratislava object to funding Ukraine's military.
• That leaves providing a loan of Ukraine cash from the frozen Russian funds, which were at first held in financial instruments but have now mostly turned into cash. That funding is Euroclear property located within the European Central Bank.

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

The proposal is for Belgium to be shielded 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 settlement agency which are in the EU.

Should Russia went after Belgium itself, any decision by a Russian court would not be accepted in the EU.

In a key development, EU ambassadors are expected to agree on Friday to permanently block Russia's central bank assets held in Europe for the foreseeable future.

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

The EU ambassadors are expected to use an special provision under Article 122 of the EU Treaties so the assets stay blocked as long as an "immediate threat to the economic interests of the union" continues.

Why Belgium is Still Not On Board

The Belgian government is firm it remains a committed partner of Ukraine, but identifies regulatory pitfalls in the plan and worries about being forced to deal with the consequences if things do not work out.

A typically partisan political environment 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 around €565bn – think about if it would need to carry a €185bn bill," says Veerle Colaert, professor of 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 additional danger of being vulnerable to extra damages or penalties.

Prof Colaert also contends the stipulation for Euroclear to issue credit to the EU would violate EU banking regulations.

"Lenders need to follow stability regulations and shouldn't concentrate risk. Now the EU is telling Euroclear to do exactly that.

"What is the purpose of these bank rules? It's because we want banks to be secure. And if things go wrong it would become the responsibility of Belgium to rescue Euroclear. That's a further cause why it's so vital for Belgium to secure water-tight guarantees for Euroclear."

EU Leaders Facing Strain from Every Direction

Time is of the essence, caution seven EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They maintain the frozen assets plan is "a financially feasible and politically achievable solution".

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

Although Russia is unyielding its money should not be accessed, there are additional apprehensions among EU officials that the US may want to employ Russia's frozen billions in another way, as part of its own peace initiative.

Zelensky has stated Ukraine is working with Europe and the US on a recovery fund, but he is also aware the US has been talking to Russia about possible partnership.

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