Moscow Hits Back at the EU's Scheme to Loan Frozen Russian Assets to Kyiv

Kyiv remains depleting its funding to sustain its armed forces and economy afloat, after nearly four years of full-scale conflict with Russia.

From the EU's perspective, the answer to plugging Ukraine's financial shortfall of €135.7bn for the coming 24 months lies in frozen Russian assets held by Belgian bank Euroclear, and EU leaders aim to sign that off at their meeting in Brussels next week.

Authorities in Russia warn the EU plan would be an illegal seizure, and Moscow's monetary authority announced on Friday it was initiating legal action against Euroclear in a Moscow court prior to a final decision is made.

'Appropriate' to Utilize Moscow's Funds, Argue Kyiv and Brussels

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

European and Ukrainian authorities maintain that those funds should be used to reconstruct what Russia has devastated: The European Commission calls it a "loan for reparations" and has proposed a plan to prop up Ukraine's economy valued at €90bn.

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

Chancellor Friedrich Merz states the assets will "enable Ukraine to protect itself efficiently against future Russian attacks".

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

The Belgian government is anxious it will be burdened by an huge bill if it all fails, and Euroclear chief executive Valérie Urbain argues using the assets could "destabilise the international financial system".

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

The leader of Belgium Bart de Wever has given Brussels a series of "logical, sensible, and warranted conditions" before he will agree to 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 Plan?

European Union officials is under pressure prior to next Thursday's summit to come up with a solution that Belgium can agree to.

So far the EU has refrained from touching the principal funds directly but starting in 2024 has transferred the "extraordinary revenues" from them to Ukraine. In 2024 that amounted to €3.7bn. Juridically, using the interest is seen as less risky as Russia is under sanction and the earnings are not Russian sovereign property.

But global military support for Ukraine has slipped dramatically in 2025, and Europe has found it difficult to make up the gap resulting from the US decision to virtually halt funding Ukraine under President Donald Trump.

There are currently two EU options designed to providing Ukraine with €90bn, to pay for two-thirds of its funding needs.

• One is to raise the money on financial markets, guaranteed by the EU budget as a surety. This is Belgium's first choice but it requires a consensus by EU leaders and that would be difficult when Hungary and Slovakia oppose funding Ukraine's military.
• This makes the other option providing a loan of Ukraine cash from the Moscow's immobilized capital, which were initially held in bonds but have now predominantly matured into cash. That capital is an asset of Euroclear located within the European Central Bank.

Brussels' executive arm recognizes Belgium has valid worries and claims it is assured it has resolved them.

The plan is for Belgium to be safeguarded with a assurance encompassing all the €210bn of Russian assets in the EU.

If 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 targeted 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 freeze indefinitely Russia's central bank assets held in Europe indefinitely.

Until now they have had to vote by consensus every six months to renew 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 continue to be immobilized 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 adamant it remains a committed partner of Ukraine, but sees legal risks in the plan and worries about being forced to deal with the consequences if things go wrong.

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

"Belgium is a small 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.

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

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

"Lenders need to comply with capital and liquidity requirements and shouldn't concentrate risk. Now the EU is instructing Euroclear to do just that.

"What is the purpose of these financial regulations? It's because we want banks to be stable. And if things go wrong it would be up to Belgium to save Euroclear. That's a further cause why it's so crucial for Belgium to secure ironclad assurances for Euroclear."

Europe Under Pressure from Multiple Fronts

The situation is urgent, warn seven EU member states including those bordering Russia such as the Baltics, Finland and Poland. They maintain the scheme involving immobilized capital is "a fiscally viable and practically possible solution".

"It is a decisive moment for us," says 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".

Although Russia is adamant its money should not be accessed, there are further worries among EU officials that the US may want to use Russia's immobilized billions in another way, as part of its own diplomatic proposal.

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

A preliminary version 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