Moscow Retaliates at the EU's Proposal to Loan Frozen Moscow's Funds to Ukraine

Ukraine is running out of cash to sustain its military and economy, after almost four years of the ongoing invasion by Moscow.

For Europe, the solution to plugging Kyiv's budget hole of €135.7bn for the following biennium lies in Moscow's immobilized funds sitting in Belgian bank Euroclear, and EU leaders seek to finalize the plan at their meeting in Brussels next week.

Russian officials caution the EU plan would be an confiscation, and the Central Bank of Russia stated on Friday it was suing Euroclear in a Moscow court ahead of a conclusive plan is made.

'Just' to Utilize Moscow's Funds, Say Ukraine and the EU

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

The EU and Ukraine argue that those funds should be used to rebuild what Russia has devastated: Brussels terms it a "loan for reparations" and has come up with 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 ours," states Ukraine's Volodymyr Zelensky.

German Chancellor Friedrich Merz says the assets will "enable Ukraine to defend itself successfully against subsequent Russian attacks".

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

Belgium is concerned it will be burdened by an massive bill if it all backfires, and Euroclear CEO Valérie Urbain argues using the assets could "undermine the global financial architecture".

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

Belgium's PM Bart de Wever has set the EU a series of "pragmatic, fair, and legitimate 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.

The Details of the EU's Proposal?

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

Until now the EU has avoided using the principal funds directly but for the past year has transferred the "excess income" from them to Ukraine. In 2024 that was €3.7bn. Juridically, using the profits 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 fallen significantly in 2025, and Europe has struggled to compensate for the shortfall caused by the US decision to virtually halt funding Ukraine under President Donald Trump.

There are at the moment two EU plans aimed at supplying Ukraine with €90bn, to finance two-thirds 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 favored solution but it needs a consensus by EU leaders and that would be difficult when two member states object to funding Ukraine's military.
• That leaves lending Ukraine cash from the frozen Russian funds, which were initially held in financial instruments but have now largely been converted into cash. That capital is an asset of Euroclear deposited at the European Central Bank.

The European Commission accepts Belgium has legitimate concerns and says it is convinced it has resolved them.

The plan is for Belgium to be shielded with a guarantee encompassing 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.

If Russia took legal action against Belgium itself, any ruling by a Russian court would not be accepted in the EU.

As an important step, 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 by consensus every six months to renew the freeze, which could have meant a constant risk to Belgium.

The EU ambassadors are set 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 security of the union" continues.

The Reasons Belgium is Remains Convinced

The Belgian government is insistent it remains a staunch ally of Ukraine, but sees regulatory pitfalls in the plan and is concerned about being forced to deal with the repercussions if things do not work out.

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

"The Belgian economy is not large. Belgian GDP is about €565bn – imagine if it would need to carry a €185bn bill," comments Veerle Colaert, professor of financial law at KU Leuven University.

Although the EU might be able to secure adequate protections for the loan itself, Belgium worries about an added risk of being subject to extra fines or liabilities.

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

"Financial institutions need to adhere to stability regulations and shouldn't make one enormous loan. 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 stable. And if things go wrong it would be up to Belgium to rescue Euroclear. That's a further cause why it's so important for Belgium to get water-tight assurances for Euroclear."

EU Leaders In a Difficult Position from Every Direction

There is no time to lose, state seven EU member states including those bordering Russia such as the Baltics, Finland and Poland. They believe the proposal to use Russian funds is "the most economically realistic and politically realistic solution".

"This is a crucial test for us," states leading German conservative MP Norbert Röttgen. "If the plan collapses, 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 EU officials that the US may want to employ Russia's frozen billions differently, as part of its own peace initiative.

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