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

Kyiv remains running out of cash to maintain its military and economy afloat, after close to 48 months of full-scale conflict with Russia.

In the view of European leaders, the answer to plugging Ukraine's budget hole of €135.7bn for the coming 24 months is found in Moscow's immobilized funds sitting in Belgian bank Euroclear, and European Union officials seek to finalize the plan at their meeting in Brussels next week.

Authorities in Russia caution the EU plan would be an illegal seizure, and Moscow's monetary authority declared on Friday it was suing Euroclear in a Moscow court ahead of a final decision is made.

'Only Fair' to Utilize Russia's Assets, Argue European and Ukrainian Officials

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

The EU and Ukraine maintain that money should be used to restore what Russia has laid waste to: The European Commission refers to it as a "loan for reparations" and has devised a plan to bolster Ukraine's economy to the tune of €90bn.

"It is appropriate that the assets frozen from Russia should be used to rebuild what Russia has devastated – and that money then becomes ours," states Ukrainian President Volodymyr Zelensky.

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

Moscow's lawsuit was anticipated in Brussels. But it is not just Moscow that is unhappy.

Belgium is worried it will be burdened by an huge bill if it all goes wrong, and Euroclear chief executive Valérie Urbain says using the assets could "disrupt the global financial architecture".

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

Belgian Prime Minister Bart de Wever has set the EU a series of "pragmatic, fair, and legitimate conditions" before he will agree to the reconstruction loan scheme, and he has refused to rule out legal action if it "presents significant risks" for his country.

What is the EU's Strategy?

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

Until now the EU has refrained from using the assets themselves directly but for the past year has paid the "excess income" from them to Ukraine. In 2024 that totaled €3.7bn. From a legal standpoint, using the revenue is considered less risky as Russia is sanctioned and the proceeds are not Moscow's sovereign assets.

But foreign defense assistance for Ukraine has fallen significantly in 2025, and Europe has had trouble trying to compensate for the shortfall resulting from the US decision to all but stop funding Ukraine under President Donald Trump.

There are at the moment two EU proposals aimed at supplying Ukraine with €90bn, to cover two-thirds of its financial requirements.

• The first is to secure the capital on financial markets, secured against the EU budget as a surety. This is Belgium's first choice but it needs a consensus by EU leaders and that would be difficult when Hungary and Slovakia are against funding Ukraine's military.
• The alternative is providing a loan of Ukraine cash from the Russian assets, which were at first held in financial instruments but have now predominantly turned into cash. That money is an asset of Euroclear deposited at the European Central Bank.

The EU's executive accepts Belgium has justified fears and states it is convinced it has dealt with them.

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

Should Euroclear face a financial hit 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 went after Belgium itself, any decision by a Russian court would not be accepted in the EU.

In a key development, EU ambassadors are set to approve on Friday to immobilise Russia's central bank assets held in Europe indefinitely.

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

The EU ambassadors are expected to use an extraordinary measure under Article 122 of the EU Treaties so the assets remain frozen as long as an "immediate threat to the economic interests 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 sees regulatory pitfalls in the plan and worries about being shouldering the consequences if things do not work out.

A usually divided political landscape in this case has united behind Prime Minister Bart de Wever, who is being pressured from fellow EU leaders.

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

Although the EU might be able to arrange enough assurances for the loan itself, Belgium is concerned about an further exposure of being subject to extra legal costs.

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

"Banks need to adhere to stability regulations and shouldn't make one enormous loan. Now the EU is asking Euroclear to do precisely that.

"What is the purpose of these financial regulations? It's because we want banks to be solvent. And if things go wrong it would become the responsibility of Belgium to bail out Euroclear. That's another reason why it's so vital for Belgium to obtain ironclad guarantees for Euroclear."

Europe Facing Strain from Multiple Fronts

The situation is urgent, caution seven EU member states including those closest to Russia such as the Baltics, Finland and Poland. They maintain the scheme involving immobilized capital is "a fiscally viable and politically achievable 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 finalize the deal in a week's time".

Although Russia is unyielding its money should not be used, there are additional apprehensions among EU officials that the US may want to employ Russia's immobilized billions in another way, as part of its own peace initiative.

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

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