Moscow Retaliates at the EU's Scheme to Loan Frozen Russian Cash to Kyiv

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

For Europe, the solution to addressing Ukraine's financial shortfall of €135.7bn for the following biennium rests with frozen Russian assets sitting in Belgian bank Euroclear, and EU leaders aim to finalize the plan at their meeting in Brussels 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 prior to a definitive agreement is made.

'Appropriate' to Use Russia's Assets, Assert Ukraine and the EU

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

European and Ukrainian authorities maintain that those funds should be used to reconstruct what Russia has laid waste to: The European Commission calls it a "reparations loan" and has devised a plan to support Ukraine's economy to the tune of €90bn.

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

Chancellor Friedrich Merz states the assets will "allow Ukraine to defend itself successfully against future Russian attacks".

The legal move by Moscow was foreseen in Brussels. But it is not just Moscow that is concerned.

Belgium is concerned it will be saddled with an huge bill if it all backfires, and Euroclear chief executive Valérie Urbain warns using the assets could "disrupt the international financial system".

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

Belgium's PM Bart de Wever has presented the EU with a series of "pragmatic, fair, and legitimate conditions" before he will accept the reconstruction loan scheme, and he has not excluded legal action if it "poses significant risks" for his country.

What is the EU's Proposal?

European Union officials is working to the wire prior to next Thursday's summit to finalize a solution that Belgium can support.

So far the EU has held off accessing the principal funds directly but for the past year has paid the "excess income" from them to Ukraine. In 2024 that was €3.7bn. From a legal standpoint, using the revenue is deemed less risky as Russia is sanctioned and the earnings are not Moscow's sovereign assets.

But foreign defense assistance for Ukraine has fallen significantly in 2025, and Europe has struggled to cover the deficit resulting from the US decision to virtually halt funding Ukraine under President Donald Trump.

There are at the moment two EU plans seeking to furnishing Ukraine with €90bn, to cover a majority of its financial requirements.

• One is to borrow the funds on financial markets, secured against the EU budget as a guarantee. This is Belgium's first choice but it requires a unanimous vote by EU leaders and that would be challenging when two member states object to funding Ukraine's military.
• That leaves lending Ukraine cash from the Russian assets, which were originally held in financial instruments but have now predominantly turned into cash. That capital is an asset of Euroclear held in the European Central Bank.

The European Commission acknowledges Belgium has valid worries and claims it is convinced it has dealt with them.

The proposal is for Belgium to be protected with a insurance covering all the €210bn of Russian assets in the EU.

Should Euroclear face a financial hit of its own assets in Russia, the shortfall would be covered from assets belonging to Russia's own settlement agency which are in the EU.

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

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

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

The EU ambassadors are planning to use an emergency clause under Article 122 of the EU Treaties so the assets continue to be immobilized as long as an "immediate threat to the financial well-being of the union" continues.

Why Belgium is Remains On Board

The Belgian government is insistent it remains a staunch ally of Ukraine, but sees juridical dangers in the plan and is concerned about being left to handle the consequences if things do not work out.

A normally divided political landscape in this case has rallied behind Prime Minister Bart de Wever, who is being pressured from other European officials.

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

While the EU might be able to secure enough protections for the loan itself, Belgium is concerned about an added risk of being exposed to extra fines or liabilities.

Prof Colaert also argues the demand for Euroclear to issue credit to the EU would violate EU banking regulations.

"Banks need to comply with capital and liquidity requirements and shouldn't make one enormous loan. Now the EU is instructing Euroclear to do just that.

"What is the purpose of these banking laws? It's because we want banks to be stable. And if things fail it would fall to Belgium to rescue Euroclear. That's another reason why it's so important for Belgium to get ironclad protections for Euroclear."

The European Union Facing Strain from Multiple Fronts

Time is of the essence, caution several EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They believe the frozen assets plan is "a financially feasible and politically achievable solution".

"It's a matter of destiny 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".

Although Russia is insistent its money should not be touched, there are added concerns among EU officials that the US may want to deploy Russia's frozen billions for another purpose, as part of its own peace plan.

Zelensky has said Ukraine is working with Europe and the US on a rebuilding fund, but he is also mindful the US has been holding discussions with Russia about potential collaboration.

An initial document of the US peace plan suggested $100bn of Russia's frozen assets being used by the US for reconstruction, with the US {taking|receiving