Russia Hits Back at the EU's Proposal to Lend Frozen Russian Cash to Kyiv

Ukraine is facing a severe shortage of financial resources to sustain its armed forces and economy afloat, after close to 48 months of Russia's full-scale war.

From the EU's perspective, the remedy to plugging Kyiv's budget hole of €135.7bn for the coming 24 months lies in Moscow's immobilized funds sitting in Belgian bank Euroclear, and EU leaders seek to give it the green light at their EU leaders' conference next week.

Authorities in Russia caution the EU plan would be an act of theft, and Moscow's monetary authority stated on Friday it was taking to court Euroclear in a Moscow court ahead of a conclusive plan is made.

'Appropriate' to Use Moscow's Assets, Argue European and Ukrainian Officials

Overall, Russia has approximately €210bn of its funds immobilized in the EU, and €185bn of that is in the custody of Euroclear.

European and Ukrainian authorities contend that those funds should be used to reconstruct what Russia has devastated: EU officials refers to it as a "reconstruction loan" and has come up with a plan to prop up Ukraine's economy to the tune of €90bn.

"It's only fair that Moscow's blocked funds should be used to reconstruct what Russia has devastated – and that money then becomes Ukraine's," states Ukrainian President Volodymyr Zelensky.

Germany's leader Friedrich Merz argues the assets will "allow Ukraine to protect itself efficiently against any future Russian attacks".

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

Belgium is worried it will be left with an massive bill if it all backfires, and Euroclear CEO Valérie Urbain warns using the assets could "undermine the global financial architecture".

Euroclear also has an roughly €16-17bn locked in Russia.

Belgian Prime Minister Bart de Wever has set the EU a series of "pragmatic, fair, and legitimate conditions" before he will accept 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 Plan?

The EU is racing against time prior to next Thursday's summit to come up with a arrangement that Belgium can support.

So far the EU has avoided using the assets themselves directly but since last year has transferred the "windfall profits" from them to Ukraine. In 2024 that amounted to €3.7bn. Juridically, using the revenue is considered permissible as Russia is under sanction and the returns are not Russian sovereign property.

But global military support for Ukraine has slipped dramatically in 2025, and Europe has found it difficult to make up the shortfall left by the US decision to virtually halt funding Ukraine under President Donald Trump.

There are presently two EU plans designed to providing Ukraine with €90bn, to cover two-thirds of its funding needs.

• Option 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 difficult when two member states are against funding Ukraine's military.
• This makes the other option loaning Ukraine cash from the Moscow's immobilized capital, which were originally held in bonds but have now predominantly matured into cash. That money is owned by Euroclear deposited at the European Central Bank.

Brussels' executive arm accepts Belgium has legitimate concerns and claims it is confident it has dealt with them.

The scheme 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, that would be offset from assets belonging to Russia's own settlement agency which are in the EU.

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

In a key development, EU ambassadors are poised to endorse on Friday to immobilise Russia's central bank assets held in Europe indefinitely.

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

The EU ambassadors are set to use an special provision under Article 122 of the EU Treaties so the assets continue to be immobilized as long as an "clear risk to the financial well-being of the union" continues.

The Reasons Belgium is Still Not Satisfied

Belgium is insistent it remains a committed partner of Ukraine, but perceives legal risks in the plan and is concerned about being forced to deal with the repercussions if things do not work out.

A typically partisan political environment in this case has united behind Prime Minister Bart de Wever, who is facing pressure from European colleagues.

"The Belgian economy is not large. Belgian GDP is around €565bn – imagine if it would need to shoulder a €185bn bill," comments Veerle Colaert, expert in financial law at KU Leuven University.

While the EU might be able to secure adequate assurances for the loan itself, Belgium worries about an further exposure of being exposed to extra damages or penalties.

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

"Lenders need to follow stability regulations and shouldn't make one enormous loan. Now the EU is instructing Euroclear to do just that.

"Why do we have these financial regulations? It's because we want banks to be solvent. And if things fail it would become the responsibility of Belgium to rescue Euroclear. That's a further cause why it's so crucial for Belgium to obtain water-tight protections for Euroclear."

Europe Under Pressure from All Sides

There is no time to lose, state several EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They maintain the frozen assets plan is "the 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 next. That's why we have to finalize the deal in a week's time".

While Russia is unyielding its money should not be used, there are additional apprehensions among EU officials that the US may want to employ Russia's blocked funds differently, as part of its own peace initiative.

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

An initial document of the US peace plan referred to $100bn of Russia's blocked funds being used by the US for reconstruction, with the US {taking|receiving