Russia Hits Back at the EU's Proposal to Loan Frozen Russian Assets to Ukraine

Kyiv remains running out of funding to keep going its military and economy, after nearly four years of the ongoing invasion by Moscow.

From the EU's perspective, the answer to plugging Kyiv's funding gap of €135.7bn for the following biennium is found in Moscow's immobilized funds held by Belgian bank Euroclear, and Brussels 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 the Central Bank of Russia declared on Friday it was initiating legal action against Euroclear in a Moscow court prior to a conclusive plan is made.

'Just' to Employ Moscow's Funds, Argue Kyiv and Brussels

All told, Russia has approximately €210bn of its state reserves frozen in the EU, and €185bn of that is held by Euroclear.

Brussels and Kyiv argue that those funds should be used to restore what Russia has devastated: The European Commission terms it a "loan for reparations" and has come up with a plan to bolster Ukraine's economy valued at €90bn.

"It is appropriate that Moscow's blocked funds should be used to rebuild what Russia has devastated – and that money then becomes ours," remarks Ukraine's Volodymyr Zelensky.

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

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

The Belgian government is concerned it will be saddled with an enormous bill if it all goes wrong, and Euroclear CEO Valérie Urbain argues using the assets could "undermine the global financial architecture".

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

Belgium's PM 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 not excluded legal action if it "carries significant risks" for his country.

What is the EU's Strategy?

Brussels is under pressure prior to next Thursday's summit to agree on a solution that Belgium can accept.

Previously the EU has refrained from touching the principal funds directly but starting in 2024 has transferred the "extraordinary revenues" from them to Ukraine. In 2024 that was €3.7bn. Legally, using the profits is deemed permissible as Russia is subject to sanctions and the proceeds are not Moscow's sovereign assets.

But international military aid for Ukraine has slipped dramatically in 2025, and Europe has struggled to make up the shortfall left by the US decision to all but stop funding Ukraine under President Donald Trump.

There are presently two EU proposals aimed at providing Ukraine with €90bn, to cover two-thirds of its financial requirements.

• The first is to secure the capital on the markets, backed by the EU budget as a collateral. This is Belgium's preferred option but it needs a unanimous vote by EU leaders and that would be difficult when Budapest and Bratislava oppose funding Ukraine's military.
• The alternative is loaning Ukraine cash from the Moscow's immobilized capital, which were originally held in bonds but have now predominantly matured into cash. That capital is owned by Euroclear located within the European Central Bank.

The European Commission acknowledges Belgium has legitimate concerns and states it is assured it has dealt with them.

The plan is for Belgium to be protected with a guarantee encompassing all the €210bn of Russian assets in the EU.

Should Euroclear face a financial hit 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.

In the event that Russia took legal action against Belgium itself, any ruling by a Russian court would not be enforced 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 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 emergency clause 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 Not Yet Satisfied

Brussels is firm it remains a staunch ally of Ukraine, but perceives legal risks in the plan and worries about being shouldering the consequences if things do not work out.

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

"Belgium is a small economy. Belgian GDP is about €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 secure adequate protections for the loan itself, Belgium is concerned about an further exposure of being subject to extra legal costs.

Prof Colaert also argues the demand for Euroclear to issue credit to the EU would contravene EU banking regulations.

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

"What is the purpose of these financial regulations? It's because we want banks to be stable. And if things turn sour it would be up to Belgium to save Euroclear. That's an additional reason why it's so important for Belgium to get absolute assurances for Euroclear."

EU Leaders Facing Strain from Every Direction

The situation is urgent, state several EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They maintain the scheme involving immobilized capital is "the most financially feasible and practically possible solution".

"It is a decisive moment 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 succeed in a week's time".

Although Russia is insistent its money should not be accessed, there are further worries among European figures that the US may want to use Russia's blocked funds for another purpose, as part of its own peace plan.

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

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