Moscow Retaliates at Europe's Proposal to Loan Immobilized Moscow's Funds to Ukraine

Kyiv remains facing a severe shortage of financial resources to maintain its military and economy afloat, after nearly four years of full-scale conflict with Russia.

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

Authorities in Russia 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 even before a conclusive plan is made.

'Only Fair' to Employ Moscow's Funds, Argue Ukraine and the EU

In total, Russia has approximately €210bn of its state reserves frozen in the EU, and €185bn of that is in the custody of Euroclear.

Brussels and Kyiv contend that money should be used to reconstruct what Russia has devastated: EU officials refers to it as a "reconstruction loan" and has devised a plan to support Ukraine's economy valued at €90bn.

"It's only fair that Moscow's blocked funds should be used to rebuild what Russia has devastated – and that those funds then becomes ours," remarks Ukrainian President Volodymyr Zelensky.

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

Moscow's lawsuit was anticipated in Brussels. But it is not only Moscow that is unhappy.

Authorities in Brussels is worried it will be left with an massive bill if it all goes wrong, and Euroclear CEO Valérie Urbain argues using the assets could "destabilise the global financial architecture".

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

Belgian Prime Minister Bart de Wever has set the EU a series of "pragmatic, fair, and legitimate conditions" before he will agree to the reconstruction loan scheme, and he has refused to rule out legal action if it "presents significant risks" for his country.

Explaining the EU's Proposal?

The EU is under pressure ahead of next Thursday's summit to agree on a compromise that Belgium can accept.

Previously the EU has refrained from using the frozen capital directly but since last year has directed the "windfall profits" from them to Ukraine. In 2024 that amounted to €3.7bn. Juridically, using the interest is seen as permissible as Russia is under sanction and the earnings are not property of the Russian state.

But global military support for Ukraine has slipped dramatically in 2025, and Europe has struggled to make up the shortfall left by the US decision to all but stop funding Ukraine under President Donald Trump.

There are at the moment two EU proposals aimed at furnishing Ukraine with €90bn, to finance two-thirds of its budgetary necessities.

• The first is to borrow the funds on capital markets, secured against the EU budget as a surety. This is Belgium's favored solution but it needs a agreement by all by EU leaders and that would be difficult when Budapest and Bratislava are against funding Ukraine's military.
• That leaves providing a loan of Ukraine cash from the Russian assets, which were at first held in securities but have now predominantly matured into cash. That money is owned by Euroclear held in the European Central Bank.

The European Commission accepts Belgium has legitimate concerns and says it is assured it has dealt with them.

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

If 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.

In the event that Russia took legal action against Belgium itself, any judgment by a Russian court would not be enforced in the EU.

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

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

The EU ambassadors are set to use an special provision under Article 122 of the EU Treaties so the assets remain frozen as long as an "direct danger to the financial well-being of the union" continues.

The Reasons Belgium is Remains Convinced

The Belgian government is firm it remains a committed partner of Ukraine, but perceives juridical dangers in the plan and fears being forced to deal with the consequences if things go wrong.

A usually partisan political environment in this case has united behind Prime Minister Bart de Wever, who is facing pressure from fellow EU leaders.

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

Although the EU might be able to arrange adequate assurances for the loan itself, Belgium worries about an added risk of being exposed to extra damages or penalties.

Prof Colaert also believes the requirement for Euroclear to issue credit to the EU would contravene 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 precisely that.

"What is the purpose of these financial regulations? It's because we want banks to be stable. And if things fail it would become the responsibility of Belgium to save Euroclear. That's an additional reason why it's so important for Belgium to obtain ironclad guarantees for Euroclear."

Europe In a Difficult Position from All Sides

The situation is urgent, warn several EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They maintain the proposal to use Russian funds is "the most fiscally viable 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 next. 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 European figures that the US may want to deploy Russia's blocked funds in another way, as part of its own peace initiative.

Zelensky has indicated Ukraine is in discussions with Europe and the US on a rebuilding fund, but he is also aware the US has been talking to Russia about potential collaboration.

An early draft 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