Moscow Retaliates at the EU's Plan to Lend Frozen Russian Assets to Kyiv

Ukraine is running out of financial resources to maintain its military and economy afloat, after nearly four years of full-scale conflict with Russia.

In the view of European leaders, the solution to plugging Kyiv's budget hole of €135.7bn for the coming 24 months rests with frozen Russian assets located within Belgian bank Euroclear, and EU leaders hope to sign that off at their Brussels summit next week.

Russian officials state the EU plan would be an act of theft, and the Central Bank of Russia announced on Friday it was taking to court Euroclear in a Moscow court prior to a final decision is made.

'Just' to Use Russia's Funds, Say European and Ukrainian Officials

Overall, Russia has about €210bn of its state reserves immobilized in the EU, and €185bn of that is managed by Euroclear.

European and Ukrainian authorities maintain that money should be used to reconstruct what Russia has destroyed: Brussels terms it a "reconstruction loan" and has devised a plan to prop up Ukraine's economy valued at €90bn.

"It is appropriate that the assets frozen from Russia 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 argues the assets will "allow Ukraine to defend itself successfully against subsequent Russian attacks".

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

The Belgian government is anxious it will be burdened by an enormous bill if it all backfires, and Euroclear chief executive Valérie Urbain says using the assets could "disrupt the international financial system".

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

The leader of Belgium Bart de Wever has set the EU a series of "rational, reasonable, and justified 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 working to the wire ahead of next Thursday's summit to finalize a solution that Belgium can support.

Until now the EU has avoided accessing the assets themselves directly but starting in 2024 has paid the "excess income" from them to Ukraine. In 2024 that was €3.7bn. From a legal standpoint, using the revenue is deemed permissible as Russia is under sanction and the earnings are not Russian sovereign property.

But international military aid for Ukraine has fallen significantly in 2025, and Europe has found it difficult to compensate for the gap resulting from the US decision to virtually halt funding Ukraine under President Donald Trump.

There are presently two EU proposals seeking to providing Ukraine with €90bn, to pay for a large portion of its financial requirements.

• Option one is to borrow the funds on the markets, guaranteed by the EU budget as a surety. This is Belgium's preferred option but it demands a unanimous vote by EU leaders and that would be challenging when Hungary and Slovakia oppose funding Ukraine's military.
• That leaves providing a loan of Ukraine cash from the Russian assets, which were originally held in financial instruments but have now largely turned into cash. That funding is owned by Euroclear held in the European Central Bank.

Brussels' executive arm accepts Belgium has justified fears and states it is assured it has addressed them.

The scheme is for Belgium to be protected with a assurance applying to 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.

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

In a key development, EU ambassadors are poised to endorse on Friday to immobilise Russia's central bank assets held in Europe permanently.

Until now they have had to vote all together every six months to extend the freeze, which could have meant a constant 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 "direct danger to the economic interests of the union" continues.

Why Belgium is Still Not Convinced

The Belgian government is insistent it remains a strong supporter of Ukraine, but identifies legal risks in the plan and worries about being shouldering the fallout if things go wrong.

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

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

Although the EU might be able to secure sufficient guarantees for the loan itself, Belgium worries about an added risk of being exposed to extra legal costs.

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

"Banks need to adhere to stability regulations and shouldn't concentrate risk. Now the EU is instructing Euroclear to do exactly that.

"What is the purpose of these bank rules? 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 a further cause why it's so vital for Belgium to secure water-tight assurances for Euroclear."

Europe Under Pressure from All Sides

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

"It is a decisive moment for us," warns 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 succeed in a week's time".

Although Russia is unyielding its money should not be touched, there are further worries 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 coordinating with Europe and the US on a reconstruction 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 blocked funds being used by the US for reconstruction, with the US {taking|receiving