Russia Retaliates at the EU's Proposal to Lend Frozen Moscow's Cash to Ukraine

Kyiv remains facing a severe shortage of funding to maintain its military and economy, after close to 48 months of full-scale conflict with Russia.

For Europe, the solution to filling Kyiv's financial shortfall of €135.7bn for the following biennium 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 Brussels summit next week.

Authorities in Russia warn the EU plan would be an confiscation, and Russia's central bank stated on Friday it was suing Euroclear in a Moscow court ahead of a definitive agreement is made.

'Appropriate' to Employ Russia's Funds, Argue Ukraine and the EU

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

Brussels and Kyiv argue that money should be used to reconstruct what Russia has devastated: Brussels terms it a "loan for reparations" and has proposed a plan to support Ukraine's economy to the tune of €90bn.

"It is appropriate that Russia's frozen assets should be used to rebuild what Russia has devastated – and that that capital then becomes Ukraine's," remarks Ukrainian President Volodymyr Zelensky.

Germany's leader Friedrich Merz says the assets will "enable Ukraine to shield itself efficiently against future Russian attacks".

Russia's court action was anticipated in Brussels. But it is not only Moscow that is dissatisfied.

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

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

Belgian Prime Minister Bart de Wever has presented the EU with a series of "logical, sensible, and warranted conditions" before he will accept the reparations plan, and he has not excluded legal action if it "presents significant risks" for his country.

Explaining the EU's Strategy?

Brussels is under pressure ahead of next Thursday's summit to agree on a arrangement that Belgium can support.

Until now the EU has refrained from using the principal funds directly but for the past year has transferred the "excess income" from them to Ukraine. In 2024 that was €3.7bn. From a legal standpoint, using the interest is considered permissible as Russia is under sanction and the returns are not property of the Russian state.

But global military support for Ukraine has fallen significantly in 2025, and Europe has struggled to make up the shortfall caused by the US decision to all but stop funding Ukraine under President Donald Trump.

There are presently two EU options seeking to furnishing Ukraine with €90bn, to pay for a majority of its funding needs.

• Option one is to secure the capital on capital markets, guaranteed by the EU budget as a guarantee. This is Belgium's first choice but it needs a consensus by EU leaders and that would be challenging when Hungary and Slovakia object to funding Ukraine's military.
• The alternative is lending Ukraine cash from the Russian assets, which were initially held in financial instruments but have now predominantly matured into cash. That money is an asset of Euroclear held in the European Central Bank.

The European Commission recognizes Belgium has legitimate concerns and claims it is convinced it has dealt with 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, the shortfall would be covered from assets belonging to Russia's own clearing house which are in the EU.

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

In a significant move, EU ambassadors are expected to agree on Friday to permanently block Russia's central bank assets held in Europe for the foreseeable future.

Heretofore 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 expected to use an special provision under Article 122 of the EU Treaties so the assets stay blocked as long as an "clear risk to the economic security of the union" continues.

The Reasons Belgium is Not Yet On Board

The Belgian government is insistent it remains a strong supporter of Ukraine, but identifies regulatory pitfalls in the plan and fears being shouldering the repercussions if things go wrong.

A usually partisan political environment in this case has come together in support of Prime Minister Bart de Wever, who is facing pressure from other European officials.

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

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

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

"Banks need to follow prudential rules and shouldn't put all their eggs in one basket. Now the EU is telling Euroclear to do precisely 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 another reason why it's so crucial for Belgium to secure water-tight protections for Euroclear."

Europe In a Difficult Position from Every Direction

There is no time to lose, caution seven EU member states including those bordering Russia such as the Baltics, Finland and Poland. They maintain the proposal to use Russian funds is "a fiscally viable 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 afterwards. That's why we have to succeed in a week's time".

While Russia is adamant its money should not be accessed, there are further worries among European figures that the US may want to employ Russia's immobilized billions differently, as part of its own diplomatic proposal.

Zelensky has stated 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 future co-operation.

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