Russia Retaliates at Europe's Proposal to Loan Frozen Russian Cash to Kyiv

Ukraine is running out of financial resources to sustain its military and economy afloat, after almost four years of Russia's full-scale war.

For Europe, the answer to plugging Ukraine's budget hole of €135.7bn for the following biennium lies in frozen Russian assets sitting in Belgian bank Euroclear, and Brussels seek to sign that off at their EU leaders' conference next week.

Russian officials warn the EU plan would be an illegal seizure, and Russia's central bank announced on Friday it was taking to court Euroclear in a Moscow court ahead of a conclusive plan is made.

'Only Fair' to Use Moscow's Funds, Assert Kyiv and Brussels

In total, Russia has approximately €210bn of its funds frozen in the EU, and €185bn of that is held by Euroclear.

The EU and Ukraine maintain that that capital should be used to restore what Russia has devastated: The European Commission refers to it as a "reconstruction loan" and has proposed a plan to support Ukraine's economy amounting to €90bn.

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

Chancellor Friedrich Merz states the assets will "help Ukraine to defend itself efficiently against any future Russian attacks".

Moscow's lawsuit was foreseen in Brussels. But it is not just Moscow that is concerned.

Authorities in Brussels is worried it will be burdened by an enormous bill if it all goes wrong, and Euroclear head Valérie Urbain warns using the assets could "destabilise the international financial system".

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

Belgium's PM Bart de Wever has set the EU a series of "logical, sensible, and warranted conditions" before he will endorse the reparations plan, and he has left open the possibility of legal action if it "poses significant risks" for his country.

Explaining the EU's Strategy?

European Union officials is under pressure before next Thursday's summit to finalize a solution that Belgium can accept.

Until now the EU has avoided accessing the frozen capital directly but starting in 2024 has directed the "windfall profits" from them to Ukraine. In 2024 that totaled €3.7bn. Legally, using the profits is deemed less risky as Russia is sanctioned and the returns are not Moscow's sovereign assets.

But global military support for Ukraine has declined sharply in 2025, and Europe has had trouble trying to make up the shortfall resulting from the US decision to virtually halt funding Ukraine under President Donald Trump.

There are currently two EU plans designed to providing Ukraine with €90bn, to pay for a majority of its budgetary necessities.

• One is to raise the money on capital markets, guaranteed by the EU budget as a guarantee. This is Belgium's preferred option but it needs a agreement by all by EU leaders and that would be difficult when two member states oppose funding Ukraine's military.
• The alternative is providing a loan of Ukraine cash from the frozen Russian funds, which were initially held in bonds but have now largely been converted into cash. That money is an asset of Euroclear deposited at the European Central Bank.

The European Commission acknowledges Belgium has valid worries and claims 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.

If Euroclear face a financial hit of its own assets in Russia, that would be offset from assets belonging to Russia's own clearing house which are in the EU.

In the event that Russia went after Belgium itself, any judgment by a Russian court would not be recognized 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 for the foreseeable future.

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

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

The Reasons Belgium is Not Yet Satisfied

Brussels is adamant it remains a committed partner of Ukraine, but perceives legal risks in the plan and worries about being shouldering the fallout if things fail.

A typically fractured political scene in this case has rallied behind Prime Minister Bart de Wever, who is being pressured from European colleagues.

"Belgium is a small economy. Belgian GDP is around €565bn – imagine if it would need to carry a €185bn bill," says Veerle Colaert, expert in financial law at KU Leuven University.

Although the EU might be able to obtain sufficient guarantees for the loan itself, Belgium fears an further exposure of being vulnerable to extra fines or liabilities.

Prof Colaert also contends the demand for Euroclear to provide a loan to the EU would contravene EU banking regulations.

"Lenders need to adhere to capital and liquidity requirements and shouldn't put all their eggs in one basket. Now the EU is instructing Euroclear to do precisely that.

"Why do we have these bank rules? It's because we want banks to be stable. And if things turn sour it would become the responsibility of Belgium to save Euroclear. That's another reason why it's so crucial for Belgium to get water-tight assurances for Euroclear."

The European Union Under Pressure from All Sides

There is no time to lose, caution a group of 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 practically possible solution".

"It's a matter of destiny for us," warns leading German conservative MP Norbert Röttgen. "If we fail, I don't know what we'll do subsequently. That's why we have to finalize the deal in a week's time".

Although Russia is insistent its money should not be used, there are additional apprehensions among leaders in Europe that the US may want to employ Russia's blocked funds differently, as part of its own peace initiative.

Zelensky has indicated Ukraine is coordinating with Europe and the US on a rebuilding fund, but he is also mindful the US has been holding discussions with Russia about future co-operation.

A preliminary version of the US peace plan referred to $100bn of Russia's blocked funds being used by the US for reconstruction, with the US {taking|receiving