Russia Retaliates at Europe's Plan to Loan Frozen Moscow's Funds to Kyiv

Ukraine is facing a severe shortage of funding to keep going its armed forces and economy, after close to 48 months of Russia's full-scale war.

From the EU's perspective, the solution to filling Ukraine's budget hole of €135.7bn for the next two years rests with frozen Russian assets located within Belgian bank Euroclear, and Brussels hope to finalize the plan at their meeting in Brussels next week.

Russian officials 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 even before a definitive agreement is made.

'Just' to Utilize Russia's Funds, Argue Ukraine and the EU

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

The EU and Ukraine maintain that that capital should be used to restore what Russia has laid waste to: EU officials terms it a "reconstruction loan" and has come up with a plan to support Ukraine's economy amounting to €90bn.

"It's only fair that Moscow's blocked funds should be used to rebuild what Russia has destroyed – and that money then becomes ours," remarks Ukraine's Volodymyr Zelensky.

Chancellor Friedrich Merz argues the assets will "enable Ukraine to defend itself effectively against future Russian attacks".

The legal move by Moscow was foreseen in Brussels. But it is not only Moscow that is dissatisfied.

Belgium is concerned it will be saddled with an massive bill if it all goes wrong, and Euroclear chief executive Valérie Urbain says using the assets could "disrupt the world's financial order".

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

The leader of Belgium 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.

Explaining the EU's Plan?

European Union officials is under pressure before next Thursday's summit to come up with a compromise that Belgium can support.

So far the EU has avoided touching the principal funds directly but starting in 2024 has paid the "extraordinary revenues" from them to Ukraine. In 2024 that amounted to €3.7bn. Juridically, using the profits is deemed permissible as Russia is subject to sanctions and the returns are not Russian sovereign property.

But international military aid for Ukraine has declined sharply in 2025, and Europe has had trouble trying to cover the gap caused by the US decision to all but stop funding Ukraine under President Donald Trump.

There are presently two EU options aimed at supplying Ukraine with €90bn, to finance a large portion of its budgetary necessities.

• The first is to borrow the funds on the markets, secured against the EU budget as a guarantee. 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.
• That leaves lending Ukraine cash from the Moscow's immobilized capital, which were at first held in financial instruments but have now mostly turned into cash. That money is Euroclear property held in the European Central Bank.

Brussels' executive arm acknowledges Belgium has justified fears and claims it is confident it has dealt with them.

The proposal is for Belgium to be shielded with a guarantee applying to all the €210bn of Russian assets in the EU.

If Euroclear face a financial hit 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.

Should Russia targeted Belgium itself, any judgment by a Russian court would not be enforced in the EU.

In a significant move, EU ambassadors are set to approve on Friday to freeze indefinitely Russia's central bank assets held in Europe for the foreseeable future.

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

The EU ambassadors are set to use an extraordinary measure under Article 122 of the EU Treaties so the assets continue to be immobilized as long as an "immediate threat to the economic security of the union" continues.

The Reasons Belgium is Remains Satisfied

Belgium is firm it remains a strong supporter of Ukraine, but perceives juridical dangers in the plan and worries about being shouldering the consequences if things do not work out.

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

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

While the EU might be able to secure adequate protections for the loan itself, Belgium worries about an additional danger of being subject to extra legal costs.

Prof Colaert also argues the requirement for Euroclear to issue credit to the EU would contravene EU banking regulations.

"Banks need to adhere to prudential rules and shouldn't put all their eggs in one basket. Now the EU is asking Euroclear to do exactly 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 fall to Belgium to save Euroclear. That's a further cause why it's so crucial for Belgium to get absolute guarantees for Euroclear."

The European Union In a Difficult Position from Multiple Fronts

The situation is urgent, warn several EU member states including those closest to Russia such as the Baltics, Finland and Poland. They argue the scheme involving immobilized capital is "the most fiscally viable and politically realistic solution".

"This is a crucial test for us," states 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 reach an agreement 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 blocked funds in another way, as part of its own peace initiative.

Zelensky has said Ukraine is in discussions with Europe and the US on a recovery fund, but he is also cognizant the US has been engaging with Russia about future co-operation.

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