Russia Retaliates at Europe's Proposal to Lend Immobilized Moscow's Funds to Kyiv

Kyiv remains depleting its cash to sustain its military and economy afloat, after close to 48 months of the ongoing invasion by Moscow.

In the view of European leaders, the solution to addressing Kyiv's budget hole of €135.7bn for the next two years lies in assets belonging to Russia that are frozen located within Belgian bank Euroclear, and European Union officials hope to sign that off at their EU leaders' conference next week.

Russian officials caution the EU plan would be an illegal seizure, and the Central Bank of Russia stated on Friday it was initiating legal action against Euroclear in a Moscow court ahead of a final decision is made.

'Appropriate' to Utilize Moscow's Funds, Say Ukraine and the EU

All told, Russia has roughly €210bn of its assets frozen in the EU, and €185bn of that is managed by Euroclear.

European and Ukrainian authorities maintain that those funds should be used to rebuild what Russia has laid waste to: Brussels refers to it as a "reconstruction loan" and has devised a plan to bolster Ukraine's economy valued at €90bn.

"It's only fair that Russia's frozen assets should be used to reconstruct what Russia has destroyed – and that those funds then becomes ours," states Ukrainian President Volodymyr Zelensky.

German Chancellor Friedrich Merz states the assets will "help Ukraine to defend itself efficiently against subsequent Russian attacks".

Moscow's lawsuit was anticipated in Brussels. But it is not only Moscow that is concerned.

Authorities in Brussels is anxious it will be left with an enormous bill if it all goes wrong, and Euroclear CEO Valérie Urbain argues using the assets could "destabilise the world's financial order".

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

Belgian Prime Minister Bart de Wever has given Brussels a series of "rational, reasonable, and justified conditions" before he will endorse the reconstruction loan scheme, and he has left open the possibility of legal action if it "poses significant risks" for his country.

What is the EU's Proposal?

European Union officials is racing against time before next Thursday's summit to agree on a compromise that Belgium can support.

Until now the EU has refrained from touching the frozen capital directly but starting in 2024 has directed the "extraordinary revenues" from them to Ukraine. In 2024 that totaled €3.7bn. From a legal standpoint, using the profits is considered less risky as Russia is sanctioned and the returns are not Moscow's sovereign assets.

But foreign defense assistance for Ukraine has fallen significantly in 2025, and Europe has struggled to make up the gap left by the US decision to virtually halt funding Ukraine under President Donald Trump.

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

• The first is to secure the capital on the markets, guaranteed by the EU budget as a guarantee. This is Belgium's first choice but it needs a unanimous vote by EU leaders and that would be challenging when Budapest and Bratislava are against funding Ukraine's military.
• The alternative is loaning Ukraine cash from the Moscow's immobilized capital, which were originally held in financial instruments but have now mostly matured into cash. That capital is an asset of Euroclear deposited at the European Central Bank.

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

The scheme is for Belgium to be shielded with a assurance covering 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.

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

In a significant move, EU ambassadors are poised to endorse on Friday to immobilise 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 constant risk to Belgium.

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

Why Belgium is Remains Satisfied

Belgium is firm it remains a staunch ally of Ukraine, but identifies regulatory pitfalls in the plan and fears being forced to deal with the fallout 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 has a modest-sized economy. Belgian GDP is around €565bn – consider if it would need to shoulder a €185bn bill," notes Veerle Colaert, academic specializing in financial regulation at KU Leuven University.

Although the EU might be able to arrange sufficient protections for the loan itself, Belgium worries about an additional danger of being subject to extra legal costs.

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

"Financial institutions need to comply with capital and liquidity requirements and shouldn't make one enormous loan. Now the EU is instructing Euroclear to do exactly that.

"What is the purpose of these banking laws? It's because we want banks to be stable. And if things fail it would be up to Belgium to bail out Euroclear. That's another reason why it's so crucial for Belgium to secure ironclad protections for Euroclear."

EU Leaders In a Difficult Position from Multiple Fronts

There is no time to lose, caution several EU member states including those bordering Russia such as the Baltics, Finland and Poland. They maintain the proposal to use Russian funds is "the most financially feasible and politically achievable solution".

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

While Russia is unyielding its money should not be touched, there are additional apprehensions among EU officials that the US may want to employ Russia's blocked funds in another way, as part of its own diplomatic proposal.

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

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