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

Kyiv remains running out of financial resources to maintain its armed forces and economy afloat, after nearly four years of full-scale conflict with Russia.

From the EU's perspective, the remedy to addressing Ukraine's financial shortfall of €135.7bn for the coming 24 months rests with frozen Russian assets held by Belgian bank Euroclear, and European Union officials seek to sign that off at their EU leaders' conference next week.

Moscow's representatives caution the EU plan would be an confiscation, and Russia's central bank declared on Friday it was initiating legal action against Euroclear in a Moscow court prior to a definitive agreement is made.

'Only Fair' to Employ Moscow's Funds, Say Kyiv and Brussels

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

The EU and Ukraine argue that that capital should be used to restore what Russia has devastated: Brussels terms it a "reparations loan" and has come up with a plan to bolster Ukraine's economy valued at €90bn.

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

German Chancellor Friedrich Merz states the assets will "enable Ukraine to shield itself successfully against future Russian attacks".

Moscow's lawsuit was expected in Brussels. But it is not only Moscow that is dissatisfied.

The Belgian government is concerned it will be left with an massive bill if it all fails, and Euroclear chief executive Valérie Urbain says using the assets could "disrupt the global financial architecture".

Euroclear also has an roughly €16-17bn locked in Russia.

Belgium's PM Bart de Wever has set the EU a series of "pragmatic, fair, and legitimate conditions" before he will accept the reconstruction loan scheme, and he has not excluded legal action if it "presents significant risks" for his country.

The Details of the EU's Plan?

The EU is working to the wire before next Thursday's summit to agree on a arrangement that Belgium can support.

Previously the EU has held off touching the principal funds directly but since last year has transferred the "excess income" from them to Ukraine. In 2024 that amounted to €3.7bn. From a legal standpoint, using the revenue is considered permissible as Russia is subject to sanctions and the proceeds are not Moscow's sovereign assets.

But international military aid for Ukraine has declined sharply in 2025, and Europe has found it difficult to make up the deficit resulting from the US decision to virtually halt funding Ukraine under President Donald Trump.

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

• One is to secure the capital on capital markets, secured against the EU budget as a guarantee. This is Belgium's favored solution but it needs a unanimous vote by EU leaders and that would be challenging when two member states oppose funding Ukraine's military.
• The alternative is lending Ukraine cash from the Moscow's immobilized capital, which were originally held in financial instruments but have now largely turned into cash. That capital is owned by Euroclear located within the European Central Bank.

The EU's executive acknowledges Belgium has legitimate concerns and says it is assured it has dealt with them.

The scheme is for Belgium to be protected with a insurance applying to 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 clearing house which are in the EU.

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

As an important step, EU ambassadors are poised to endorse on Friday to permanently block Russia's central bank assets held in Europe indefinitely.

Until now they have had to vote unanimously every six months to renew the freeze, which could have meant a repeated risk to Belgium.

The EU ambassadors are planning to use an special provision under Article 122 of the EU Treaties so the assets remain frozen as long as an "clear risk to the economic interests of the union" continues.

The Reasons Belgium is Still Not Satisfied

The Belgian government is firm it remains a committed partner of Ukraine, but perceives juridical dangers in the plan and worries about being shouldering the repercussions if things fail.

A usually fractured political scene in this case has rallied behind Prime Minister Bart de Wever, who is facing pressure from European colleagues.

"Belgium is a small economy. Belgian GDP is about €565bn – imagine if it would need to bear a €185bn bill," says Veerle Colaert, professor of financial law at KU Leuven University.

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

Prof Colaert also believes the stipulation for Euroclear to provide a loan to the EU would breach EU banking regulations.

"Financial institutions need to adhere to prudential rules and shouldn't concentrate risk. Now the EU is asking Euroclear to do just that.

"What is the purpose of these bank rules? It's because we want banks to be secure. And if things fail it would fall to Belgium to rescue Euroclear. That's an additional reason why it's so crucial for Belgium to obtain ironclad guarantees for Euroclear."

Europe In a Difficult Position from Every Direction

There is no time to lose, state a group of EU member states including those closest to Russia such as the Baltics, Finland and Poland. They argue the proposal to use Russian funds is "the economically realistic and practically possible solution".

"It is a decisive moment for us," warns leading German conservative MP Norbert Röttgen. "If we fail, I don't know what we'll do next. That's why we have to reach an agreement in a week's time".

While Russia is adamant its money should not be touched, there are additional apprehensions among leaders in Europe that the US may want to employ Russia's blocked funds for another purpose, as part of its own diplomatic proposal.

Zelensky has said Ukraine is working with Europe and the US on a recovery 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