Russia Hits Back at Europe's Proposal to Loan Frozen Moscow's Funds to Ukraine

Ukraine is depleting its funding to keep going its armed forces and economy afloat, after close to 48 months of the ongoing invasion by Moscow.

In the view of European leaders, the remedy to filling Kyiv's budget hole of €135.7bn for the next two years rests with assets belonging to Russia that are frozen located within Belgian bank Euroclear, and European Union officials aim to sign that off at their meeting in Brussels next week.

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

'Just' to Utilize Moscow's Assets, Say European and Ukrainian Officials

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

The EU and Ukraine maintain that that capital should be used to restore what Russia has destroyed: The European Commission calls it a "loan for reparations" and has proposed a plan to prop up Ukraine's economy amounting to €90bn.

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

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

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

Belgium is worried it will be burdened by an massive 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 immobilised in Russia.

The leader of Belgium Bart de Wever has given Brussels a series of "pragmatic, fair, and legitimate conditions" before he will endorse the reparations plan, and he has not excluded legal action if it "poses significant risks" for his country.

Explaining the EU's Strategy?

The EU is under pressure ahead of next Thursday's summit to come up with a arrangement that Belgium can support.

Until now the EU has refrained from accessing the assets themselves directly but starting in 2024 has directed the "windfall profits" from them to Ukraine. In 2024 that amounted to €3.7bn. Juridically, using the revenue is seen as safe as Russia is subject to sanctions and the proceeds are not Moscow's sovereign assets.

But international military aid for Ukraine has slipped dramatically in 2025, and Europe has had trouble trying to compensate for the deficit caused by the US decision to largely cease funding Ukraine under President Donald Trump.

There are presently two EU options seeking to furnishing Ukraine with €90bn, to finance a majority of its budgetary necessities.

• One is to secure the capital on the markets, backed by the EU budget as a collateral. This is Belgium's favored solution but it demands a unanimous vote by EU leaders and that would be problematic when two member states object to funding Ukraine's military.
• The alternative is lending Ukraine cash from the Moscow's immobilized capital, which were originally held in financial instruments but have now largely turned into cash. That money is Euroclear property deposited at the European Central Bank.

The European Commission recognizes Belgium has legitimate concerns and states it is convinced it has dealt with them.

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

Should Euroclear face a financial hit of its own assets in Russia, the loss would be compensated 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 recognized in the EU.

In a key development, EU ambassadors are set to approve on Friday to permanently block Russia's central bank assets held in Europe for the foreseeable future.

Heretofore they have had to vote by consensus every six months to continue 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 continue to be immobilized as long as an "immediate threat to the economic security of the union" continues.

The Reasons Belgium is Remains Convinced

The Belgian government is firm it remains a committed partner of Ukraine, but perceives legal risks in the plan and worries about being shouldering the fallout if things fail.

A usually divided political landscape in this case has united behind Prime Minister Bart de Wever, who is being pressured from European colleagues.

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

While the EU might be able to obtain sufficient guarantees for the loan itself, Belgium worries about an further exposure of being vulnerable to extra damages or penalties.

Prof Colaert also believes the stipulation for Euroclear to issue credit to the EU would violate EU banking regulations.

"Lenders need to comply with stability regulations and shouldn't put all their eggs in one basket. Now the EU is asking Euroclear to do just that.

"What is the purpose of these banking laws? It's because we want banks to be secure. And if things go wrong it would become the responsibility of Belgium to bail out Euroclear. That's a further cause why it's so vital for Belgium to obtain absolute assurances for Euroclear."

EU Leaders Under Pressure from All Sides

Time is of the essence, warn several EU member states including those closest to Russia such as the Baltics, Finland and Poland. They argue the proposal to use Russian funds is "a fiscally viable and politically achievable solution".

"It's a matter of destiny for us," says leading German conservative MP Norbert Röttgen. "Should we not succeed, I don't know what we'll do subsequently. That's why we have to finalize the deal in a week's time".

While Russia is insistent its money should not be touched, there are further worries among leaders in Europe that the US may want to deploy Russia's immobilized billions in another way, as part of its own diplomatic proposal.

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

An initial document 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