Moscow Retaliates at the EU's Proposal to Loan Frozen Moscow's Funds to Ukraine

Ukraine is facing a severe shortage of financial resources to sustain its armed forces and economy, after almost four years of the ongoing invasion by Moscow.

For Europe, the solution to plugging Ukraine's funding gap of €135.7bn for the coming 24 months lies in frozen Russian assets sitting in Belgian bank Euroclear, and European Union officials seek to finalize the plan at their Brussels summit next week.

Moscow's representatives warn the EU plan would be an illegal seizure, and Russia's central bank announced on Friday it was taking to court Euroclear in a Moscow court even before a definitive agreement is made.

'Only Fair' to Employ Russia's Funds, Say European and Ukrainian Officials

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

Brussels and Kyiv maintain that those funds should be used to rebuild what Russia has destroyed: Brussels calls it a "reparations loan" and has come up with a plan to bolster Ukraine's economy amounting to €90bn.

"It's only fair that the assets frozen from Russia should be used to rebuild what Russia has devastated – and that that capital then becomes Ukraine's," states Ukrainian President Volodymyr Zelensky.

Germany's leader Friedrich Merz argues the assets will "help Ukraine to defend itself successfully against subsequent Russian attacks".

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

The Belgian government is anxious it will be saddled with an enormous bill if it all backfires, and Euroclear CEO Valérie Urbain warns using the assets could "disrupt the world's financial order".

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

The leader of Belgium Bart de Wever has presented the EU with a series of "rational, reasonable, and justified conditions" before he will endorse the reparations plan, and he has left open the possibility of legal action if it "carries significant risks" for his country.

The Details of the EU's Proposal?

Brussels is working to the wire ahead of next Thursday's summit to agree on a compromise that Belgium can support.

Until now the EU has refrained from using the assets themselves directly but starting in 2024 has paid the "excess income" from them to Ukraine. In 2024 that was €3.7bn. Juridically, using the profits is seen as permissible as Russia is subject to sanctions and the returns are not Russian sovereign property.

But global military support for Ukraine has fallen significantly in 2025, and Europe has struggled to cover the gap left by the US decision to largely cease funding Ukraine under President Donald Trump.

There are presently two EU plans aimed at supplying Ukraine with €90bn, to finance two-thirds of its budgetary necessities.

• One is to raise the money on capital markets, secured against the EU budget as a guarantee. This is Belgium's favored solution but it requires a consensus by EU leaders and that would be challenging when Budapest and Bratislava are against funding Ukraine's military.
• This makes the other option loaning Ukraine cash from the Moscow's immobilized capital, which were at first held in bonds but have now largely turned into cash. That funding is an asset of Euroclear held in the European Central Bank.

The European Commission recognizes Belgium has justified fears and says it is convinced it has addressed them.

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

Should Euroclear incur losses 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 targeted Belgium itself, any ruling 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 indefinitely.

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

The EU ambassadors are planning to use an special provision under Article 122 of the EU Treaties so the assets continue to be immobilized as long as an "clear risk to the economic security of the union" continues.

Why Belgium is Not Yet Satisfied

The Belgian government is insistent it remains a staunch ally of Ukraine, but perceives regulatory pitfalls in the plan and is concerned about being left to handle the consequences if things fail.

A normally partisan political environment in this case has united behind Prime Minister Bart de Wever, who is under pressure from European colleagues.

"The Belgian economy is not large. Belgian GDP is around €565bn – imagine if it would need to carry a €185bn bill," comments Veerle Colaert, academic specializing in financial regulation at KU Leuven University.

While the EU might be able to secure adequate assurances for the loan itself, Belgium fears an added risk of being subject to extra legal costs.

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

"Banks need to comply with capital and liquidity requirements and shouldn't make one enormous loan. Now the EU is telling 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 become the responsibility of Belgium to bail out Euroclear. That's a further cause why it's so crucial for Belgium to secure water-tight assurances for Euroclear."

Europe Facing Strain from All Sides

Time is of the essence, warn several EU member states including those bordering Russia such as the Baltics, Finland and Poland. They argue the proposal to use Russian funds is "a economically realistic and politically realistic solution".

"It is a decisive moment for us," says leading German conservative MP Norbert Röttgen. "If we fail, 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 unyielding its money should not be touched, there are added concerns among EU officials that the US may want to employ Russia's immobilized billions differently, as part of its own diplomatic proposal.

Zelensky has said Ukraine is coordinating with Europe and the US on a reconstruction fund, but he is also aware the US has been engaging with Russia about potential collaboration.

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