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

Kyiv remains facing a severe shortage of financial resources to sustain its military and economy, after almost four years of the ongoing invasion by Moscow.

For Europe, the solution to plugging Kyiv's funding gap of €135.7bn for the coming 24 months rests with frozen Russian assets sitting in Belgian bank Euroclear, and Brussels seek to give it the green light at their Brussels summit next week.

Authorities in Russia caution the EU plan would be an illegal seizure, and Moscow's monetary authority stated on Friday it was initiating legal action against Euroclear in a Moscow court ahead of a conclusive plan is made.

'Just' to Use Russia's Funds, Argue European and Ukrainian Officials

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

Brussels and Kyiv argue that money should be used to rebuild what Russia has devastated: EU officials terms it a "reconstruction loan" and has come up with a plan to support Ukraine's economy to the tune of €90bn.

"It's only fair that Russia's frozen assets 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 states the assets will "allow Ukraine to protect itself efficiently against subsequent Russian attacks".

Moscow's lawsuit was expected in Brussels. But it is not just Moscow that is unhappy.

Belgium is worried it will be saddled with an enormous bill if it all backfires, and Euroclear head Valérie Urbain says using the assets could "destabilise the world's financial order".

Euroclear also has an roughly €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 agree to the reparations plan, and he has refused to rule out legal action if it "presents significant risks" for his country.

The Details of the EU's Proposal?

Brussels is under pressure prior to next Thursday's summit to come up with a compromise that Belgium can support.

Previously the EU has refrained from using the assets themselves directly but starting in 2024 has directed the "excess income" from them to Ukraine. In 2024 that totaled €3.7bn. From a legal standpoint, using the revenue is considered permissible 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 had trouble trying to compensate for the gap caused by the US decision to largely cease funding Ukraine under President Donald Trump.

There are currently two EU plans designed to furnishing Ukraine with €90bn, to cover two-thirds of its financial requirements.

• The first is to raise the money on financial markets, guaranteed by the EU budget as a surety. This is Belgium's first choice but it requires a unanimous vote by EU leaders and that would be difficult when Hungary and Slovakia are against funding Ukraine's military.
• That leaves providing a loan of Ukraine cash from the frozen Russian funds, which were initially held in financial instruments but have now predominantly matured into cash. That capital is Euroclear property deposited at the European Central Bank.

Brussels' executive arm recognizes Belgium has valid worries and claims it is assured it has resolved them.

The proposal is for Belgium to be shielded with a assurance encompassing 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 clearing house which are in the EU.

In the event that Russia targeted Belgium itself, any decision by a Russian court would not be enforced in the EU.

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

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

The EU ambassadors are planning to use an emergency clause under Article 122 of the EU Treaties so the assets stay blocked as long as an "direct danger to the economic interests of the union" continues.

Why Belgium is Remains Satisfied

Belgium is adamant it remains a committed partner of Ukraine, but identifies legal risks in the plan and fears being shouldering the fallout if things do not work out.

A normally divided political landscape in this case has united behind Prime Minister Bart de Wever, who is facing pressure from fellow EU leaders.

"The Belgian economy is not large. Belgian GDP is about €565bn – think about 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 protections for the loan itself, Belgium fears an additional danger of being exposed to extra fines or liabilities.

Prof Colaert also argues the requirement for Euroclear to grant a loan to the EU would contravene EU banking regulations.

"Financial institutions need to adhere to capital and liquidity requirements and shouldn't make one enormous loan. Now the EU is asking Euroclear to do just that.

"Why do we have these bank rules? It's because we want banks to be solvent. And if things turn sour it would be up to Belgium to bail out Euroclear. That's an additional reason why it's so vital for Belgium to get absolute guarantees for Euroclear."

The European Union Under Pressure from Every Direction

Time is of the essence, caution several EU member states including those closest to Russia such as the Baltics, Finland and Poland. They argue the scheme involving immobilized capital is "the most economically realistic and politically achievable solution".

"It's a matter of destiny for us," says leading German conservative MP Norbert Röttgen. "Should we not succeed, I don't know what we'll do afterwards. That's why we have to reach an agreement in a week's time".

Although Russia is insistent its money should not be used, there are further worries among European figures that the US may want to employ Russia's frozen billions in another way, as part of its own peace plan.

Zelensky has indicated Ukraine is working with Europe and the US on a recovery fund, but he is also cognizant the US has been engaging with Russia about possible partnership.

An early draft of the US peace plan referred to $100bn of Russia's frozen assets being used by the US for reconstruction, with the US {taking|receiving