Moscow Retaliates at Europe's Proposal to Lend Frozen Russian Funds to Ukraine

Ukraine is facing a severe shortage of funding to keep going its military and economy afloat, after nearly four years of the ongoing invasion by Moscow.

From the EU's perspective, the answer to plugging Kyiv's financial shortfall of €135.7bn for the following biennium rests with frozen Russian assets located within Belgian bank Euroclear, and Brussels seek to finalize the plan at their Brussels summit next week.

Moscow's representatives warn the EU plan would be an illegal seizure, and Moscow's monetary authority declared on Friday it was initiating legal action against Euroclear in a Moscow court ahead of a definitive agreement is made.

'Appropriate' to Utilize Moscow's Funds, Argue European and Ukrainian Officials

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

European and Ukrainian authorities maintain that that capital should be used to reconstruct what Russia has laid waste to: The European Commission terms it a "loan for reparations" and has proposed a plan to prop up Ukraine's economy valued at €90bn.

"It is only just that the assets frozen from Russia should be used to reconstruct what Russia has devastated – and that those funds then becomes ours," says Ukraine's Volodymyr Zelensky.

German Chancellor Friedrich Merz argues the assets will "help 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 concerned.

Belgium is worried it will be burdened by an huge bill if it all backfires, and Euroclear CEO Valérie Urbain argues using the assets could "undermine the global financial architecture".

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

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

What is the EU's Proposal?

Brussels is working to the wire prior to next Thursday's summit to agree on a solution that Belgium can accept.

Previously the EU has refrained from using the principal funds directly but for the past year has directed the "windfall profits" from them to Ukraine. In 2024 that totaled €3.7bn. From a legal standpoint, using the revenue is deemed permissible as Russia is under sanction and the returns are not Russian sovereign property.

But global military support for Ukraine has fallen significantly in 2025, and Europe has had trouble trying to compensate for the gap resulting from the US decision to largely cease funding Ukraine under President Donald Trump.

There are presently two EU proposals aimed at supplying Ukraine with €90bn, to cover a majority of its budgetary necessities.

• One is to raise the money on capital markets, backed by the EU budget as a collateral. This is Belgium's preferred option but it requires a unanimous vote by EU leaders and that would be problematic when two member states oppose funding Ukraine's military.
• This makes the other option lending Ukraine cash from the Moscow's immobilized capital, which were at first held in financial instruments but have now largely matured into cash. That capital is owned by Euroclear located within the European Central Bank.

The European Commission recognizes Belgium has valid worries and claims it is convinced it has resolved them.

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

If Euroclear incur losses 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 decision by a Russian court would not be accepted in the EU.

As an important step, EU ambassadors are set to approve on Friday to permanently block Russia's central bank assets held in Europe for the foreseeable future.

Previously they have had to vote unanimously every six months to continue the freeze, which could have meant a ongoing risk to Belgium.

The EU ambassadors are planning to use an emergency clause under Article 122 of the EU Treaties so the assets continue to be immobilized as long as an "immediate threat to the economic security of the union" continues.

The Reasons Belgium is Not Yet Satisfied

Brussels is insistent it remains a strong supporter of Ukraine, but identifies juridical dangers in the plan and worries about being forced to deal with the consequences if things go wrong.

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

"Belgium is a small economy. Belgian GDP is about €565bn – think about if it would need to carry a €185bn bill," notes Veerle Colaert, expert in financial law at KU Leuven University.

Although the EU might be able to arrange enough protections for the loan itself, Belgium worries about an added risk of being exposed to extra fines or liabilities.

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

"Financial institutions need to follow capital and liquidity requirements and shouldn't put all their eggs in one basket. Now the EU is instructing Euroclear to do just that.

"What is the purpose of these financial regulations? It's because we want banks to be solvent. And if things fail it would become the responsibility of Belgium to bail out Euroclear. That's a further cause why it's so important for Belgium to obtain absolute assurances for Euroclear."

Europe In a Difficult Position from Every Direction

Time is of the essence, state a group of EU member states including those closest to Russia such as the Baltics, Finland and Poland. They believe the proposal to use Russian funds is "a financially feasible and practically possible solution".

"This is a crucial test 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".

While Russia is unyielding its money should not be accessed, there are further worries among EU officials that the US may want to employ Russia's immobilized billions differently, as part of its own peace initiative.

Zelensky has stated Ukraine is coordinating with Europe and the US on a rebuilding fund, but he is also aware the US has been engaging with Russia about possible partnership.

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