Russia Retaliates at the EU's Proposal to Loan Frozen Russian Funds to Kyiv

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

From the EU's perspective, the remedy to filling Ukraine's budget hole of €135.7bn for the following biennium is found in Moscow's immobilized funds sitting in Belgian bank Euroclear, and European Union officials hope to sign that off at their EU leaders' conference next week.

Moscow's representatives caution the EU plan would be an confiscation, and Moscow's monetary authority announced on Friday it was suing Euroclear in a Moscow court prior to a conclusive plan is made.

'Only Fair' to Utilize Russia's Assets, Say Kyiv and Brussels

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

The EU and Ukraine contend that those funds should be used to reconstruct what Russia has devastated: Brussels calls it a "loan for reparations" and has devised a plan to prop up Ukraine's economy amounting to €90bn.

"It is only just that Russia's frozen assets should be used to reconstruct what Russia has devastated – and that that capital then becomes Ukraine's," says Ukrainian President Volodymyr Zelensky.

Germany's leader Friedrich Merz states the assets will "allow Ukraine to defend itself efficiently against subsequent Russian attacks".

The legal move by Moscow was expected in Brussels. But it is not just Moscow that is unhappy.

Authorities in Brussels is anxious it will be saddled with an massive bill if it all fails, and Euroclear chief executive Valérie Urbain argues using the assets could "undermine the world's financial order".

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

Belgian Prime Minister Bart de Wever has presented the EU with a series of "pragmatic, fair, and legitimate conditions" before he will endorse the reparations plan, and he has not excluded legal action if it "presents significant risks" for his country.

What is the EU's Strategy?

Brussels is racing against time prior to next Thursday's summit to come up with a solution that Belgium can support.

So far the EU has refrained from accessing the assets themselves directly but for the past year has transferred the "windfall profits" from them to Ukraine. In 2024 that amounted to €3.7bn. Juridically, using the profits is deemed permissible as Russia is subject to sanctions and the earnings are not Moscow's sovereign assets.

But global military support for Ukraine has declined sharply in 2025, and Europe has struggled to compensate for the deficit left by the US decision to virtually halt funding Ukraine under President Donald Trump.

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

• Option one is to secure the capital on capital markets, backed by the EU budget as a guarantee. This is Belgium's first choice but it demands a consensus by EU leaders and that would be challenging when Hungary and Slovakia are against funding Ukraine's military.
• That leaves loaning Ukraine cash from the frozen Russian funds, which were originally held in financial instruments but have now largely been converted into cash. That funding is owned by Euroclear located within the European Central Bank.

The EU's executive acknowledges Belgium has justified fears and states it is convinced it has dealt with them.

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

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

As an important step, EU ambassadors are expected to agree on Friday to immobilise Russia's central bank assets held in Europe indefinitely.

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

The EU ambassadors are planning 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 financial well-being of the union" continues.

The Reasons Belgium is Still Not Satisfied

Belgium is firm it remains a staunch ally of Ukraine, but sees juridical dangers in the plan and worries about being left to handle the repercussions if things fail.

A typically fractured political scene in this case has united behind Prime Minister Bart de Wever, who is under pressure from European colleagues.

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

While the EU might be able to arrange sufficient guarantees for the loan itself, Belgium worries about an further exposure of being vulnerable to extra legal costs.

Prof Colaert also believes the stipulation for Euroclear to provide a loan to the EU would violate EU banking regulations.

"Lenders need to follow prudential rules and shouldn't concentrate risk. Now the EU is instructing Euroclear to do exactly that.

"What is the purpose of these financial regulations? It's because we want banks to be secure. And if things go wrong it would become the responsibility of Belgium to save Euroclear. That's an additional reason why it's so crucial for Belgium to obtain water-tight protections for Euroclear."

The European Union In a Difficult Position from Every Direction

Time is of the essence, state a group of EU member states including those closest to Russia such as the Baltics, Finland and Poland. They believe the scheme involving immobilized capital is "the financially feasible and politically realistic solution".

"It is a decisive moment for us," says leading German conservative MP Norbert Röttgen. "Should we not succeed, I don't know what we'll do afterwards. That's why we have to reach an agreement in a week's time".

While Russia is adamant its money should not be used, there are additional apprehensions among leaders in Europe that the US may want to use Russia's immobilized billions differently, as part of its own diplomatic proposal.

Zelensky has indicated Ukraine is working with Europe and the US on a recovery 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 frozen assets being used by the US for reconstruction, with the US {taking|receiving