Moscow Retaliates at Europe's Scheme to Loan Frozen Moscow's Funds to Ukraine

Ukraine is running out of funding to keep going its military and economy afloat, after almost four years of full-scale conflict with Russia.

From the EU's perspective, the remedy to plugging Kyiv's funding gap of €135.7bn for the next two years lies in frozen Russian assets sitting in Belgian bank Euroclear, and EU leaders hope to sign that off at their EU leaders' conference next week.

Authorities in Russia caution 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 definitive agreement is made.

'Appropriate' to Use Russia's Assets, Argue European and Ukrainian Officials

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

European and Ukrainian authorities contend that that capital should be used to reconstruct what Russia has destroyed: The European Commission calls it a "reconstruction loan" and has devised a plan to support 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 that capital then becomes Ukraine's," says Ukrainian President Volodymyr Zelensky.

Chancellor Friedrich Merz says the assets will "help Ukraine to defend itself efficiently against subsequent Russian attacks".

The legal move by Moscow was expected in Brussels. But it is not only Moscow that is dissatisfied.

Belgium is concerned it will be left with an massive bill if it all backfires, and Euroclear head Valérie Urbain says using the assets could "disrupt the world's financial order".

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

The leader of Belgium Bart de Wever has presented the EU with a series of "logical, sensible, and warranted conditions" before he will endorse the reparations plan, and he has not excluded legal action if it "poses significant risks" for his country.

What is the EU's Plan?

Brussels is under pressure before next Thursday's summit to come up with a solution that Belgium can agree to.

So far the EU has avoided accessing the frozen capital directly but for the past year has paid the "windfall profits" from them to Ukraine. In 2024 that amounted to €3.7bn. Legally, using the profits is seen as safe as Russia is sanctioned and the earnings are not property of the Russian state.

But global military support for Ukraine has fallen significantly in 2025, and Europe has struggled to compensate for the deficit caused by 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 two-thirds of its funding needs.

• The first is to borrow the funds on capital markets, guaranteed by the EU budget as a collateral. This is Belgium's first choice but it needs a unanimous vote by EU leaders and that would be challenging when Budapest and Bratislava object to funding Ukraine's military.
• That leaves providing a loan of Ukraine cash from the frozen Russian funds, which were at first held in financial instruments but have now mostly been converted into cash. That money is owned by Euroclear held in the European Central Bank.

The EU's executive recognizes Belgium has legitimate concerns and states it is convinced it has addressed them.

The plan is for Belgium to be shielded with a assurance encompassing all the €210bn of Russian assets in the EU.

If Euroclear suffer a loss 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.

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

As an important step, EU ambassadors are expected to agree on Friday to permanently block Russia's central bank assets held in Europe for the foreseeable future.

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

The EU ambassadors are set to use an extraordinary measure under Article 122 of the EU Treaties so the assets stay blocked as long as an "clear risk to the economic interests of the union" continues.

Why Belgium is Not Yet On Board

Belgium is firm it remains a staunch ally of Ukraine, but sees regulatory pitfalls in the plan and worries about being left to handle the repercussions if things go wrong.

A usually partisan political environment in this case has rallied behind Prime Minister Bart de Wever, who is under pressure from other European officials.

"The Belgian economy is not large. Belgian GDP is about €565bn – consider if it would need to carry a €185bn bill," says 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 fears an added risk of being exposed to extra damages or penalties.

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

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

"Why do we have these financial regulations? It's because we want banks to be solvent. And if things turn sour it would be up to Belgium to save Euroclear. That's another reason why it's so important for Belgium to secure absolute guarantees for Euroclear."

Europe In a Difficult Position from All Sides

The situation is urgent, warn seven EU member states including those bordering Russia such as the Baltics, Finland and Poland. They argue the proposal to use Russian funds is "a fiscally viable and politically realistic solution".

"It's a matter of destiny for us," says 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 reach an agreement in a week's time".

Although Russia is adamant its money should not be used, there are further worries among leaders in Europe that the US may want to deploy Russia's immobilized billions differently, as part of its own peace initiative.

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

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