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

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

For Europe, the solution to plugging Kyiv's funding gap of €135.7bn for the coming 24 months lies in Moscow's immobilized funds sitting in Belgian bank Euroclear, and EU leaders hope to finalize the plan at their Brussels summit next week.

Russian officials warn the EU plan would be an act of theft, and Russia's central bank stated on Friday it was suing Euroclear in a Moscow court prior to a definitive agreement is made.

'Only Fair' to Use Russia's Funds, Assert Ukraine and the EU

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

Brussels and Kyiv maintain that money should be used to reconstruct what Russia has destroyed: The European Commission refers to it as a "reparations loan" and has come up with a plan to prop up Ukraine's economy valued at €90bn.

"It's only fair that the assets frozen from Russia should be used to reconstruct what Russia has destroyed – and that those funds then becomes Ukraine's," states Ukrainian President Volodymyr Zelensky.

Chancellor Friedrich Merz argues the assets will "help Ukraine to protect itself successfully against any future Russian attacks".

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

Belgium is anxious it will be burdened by an massive bill if it all goes wrong, and Euroclear CEO Valérie Urbain warns using the assets could "destabilise the international financial system".

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

Belgium's PM Bart de Wever has set the EU a series of "rational, reasonable, and justified conditions" before he will accept the reparations plan, and he has not excluded legal action if it "poses significant risks" for his country.

The Details of the EU's Proposal?

The EU is under pressure ahead of next Thursday's summit to come up with a arrangement that Belgium can accept.

Until now the EU has held off accessing the frozen capital directly but for the past year has transferred the "windfall profits" from them to Ukraine. In 2024 that amounted to €3.7bn. From a legal standpoint, using the profits is considered less risky as Russia is sanctioned and the returns are not Moscow's sovereign assets.

But international military aid for Ukraine has fallen significantly in 2025, and Europe has had trouble trying to compensate for the deficit caused by the US decision to largely cease funding Ukraine under President Donald Trump.

There are at the moment two EU plans aimed at furnishing Ukraine with €90bn, to pay for a majority of its budgetary necessities.

• One is to secure the capital on capital markets, secured against the EU budget as a surety. This is Belgium's favored solution but it needs a consensus by EU leaders and that would be challenging when two member states object to funding Ukraine's military.
• The alternative is providing a loan of Ukraine cash from the frozen Russian funds, which were at first held in financial instruments but have now largely matured into cash. That money is an asset of Euroclear located within the European Central Bank.

The EU's executive recognizes Belgium has valid worries and states it is confident it has dealt with them.

The proposal is for Belgium to be shielded with a insurance covering 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 went after Belgium itself, any judgment by a Russian court would not be accepted in the EU.

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

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

The EU ambassadors are set to use an special provision 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.

Why Belgium is Remains On Board

The Belgian government is firm it remains a strong supporter of Ukraine, but perceives legal risks in the plan and worries about being forced to deal with the consequences if things do not work out.

A normally fractured political scene in this case has rallied behind Prime Minister Bart de Wever, who is facing pressure from fellow EU leaders.

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

While the EU might be able to arrange adequate guarantees for the loan itself, Belgium worries about an additional danger of being exposed to extra damages or penalties.

Prof Colaert also believes the stipulation for Euroclear to issue credit to the EU would violate EU banking regulations.

"Lenders need to follow stability regulations and shouldn't make one enormous loan. Now the EU is instructing Euroclear to do just that.

"Why do we have these banking laws? It's because we want banks to be solvent. And if things go wrong it would fall to Belgium to save Euroclear. That's another reason why it's so vital for Belgium to get absolute guarantees for Euroclear."

EU Leaders Under Pressure from Multiple Fronts

Time is of the essence, state a group of EU member states including those bordering Russia such as the Baltics, Finland and Poland. They maintain the scheme involving immobilized capital is "the most fiscally viable and politically realistic 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 next. That's why we have to reach an agreement in a week's time".

While Russia is unyielding its money should not be used, there are additional apprehensions among EU officials that the US may want to deploy Russia's blocked funds in another way, as part of its own peace plan.

Zelensky has said Ukraine is coordinating with Europe and the US on a reconstruction fund, but he is also mindful 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