Moscow Responds at Europe's Plan to Lend Frozen Russian Funds to Ukraine

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

From the EU's perspective, the answer to addressing Kyiv's funding gap of €135.7bn for the coming 24 months rests with Moscow's immobilized funds located within Belgian bank Euroclear, and European Union officials seek to sign that off at their Brussels summit next week.

Russian officials caution the EU plan would be an illegal seizure, and Moscow's monetary authority announced on Friday it was initiating legal action against Euroclear in a Moscow court even before a definitive agreement is made.

'Appropriate' to Utilize Russia's Funds, Argue European and Ukrainian Officials

Overall, Russia has approximately €210bn of its state reserves frozen in the EU, and €185bn of that is held by Euroclear.

The EU and Ukraine argue that that capital should be used to reconstruct what Russia has laid waste to: EU officials terms it a "loan for reparations" and has come up with a plan to prop up Ukraine's economy amounting to €90bn.

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

Germany's leader Friedrich Merz says the assets will "help Ukraine to protect itself successfully against subsequent Russian attacks".

Russia's court action was foreseen in Brussels. But it is not just Moscow that is concerned.

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

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

The leader of Belgium Bart de Wever has set the EU a series of "logical, sensible, and warranted conditions" before he will accept the reconstruction loan scheme, and he has left open the possibility of legal action if it "carries 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 agree to.

Until now the EU has refrained from using the assets themselves directly but starting in 2024 has directed the "extraordinary revenues" from them to Ukraine. In 2024 that was €3.7bn. From a legal standpoint, using the profits is deemed permissible as Russia is sanctioned and the proceeds are not Moscow's sovereign assets.

But global military support for Ukraine has slipped dramatically in 2025, and Europe has struggled to compensate for the shortfall caused 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 pay for a majority of its budgetary necessities.

• The first is to borrow the funds on capital markets, backed by the EU budget as a surety. This is Belgium's first choice but it needs a agreement by all by EU leaders and that would be challenging when Budapest and Bratislava are against funding Ukraine's military.
• That leaves providing a loan of Ukraine cash from the Moscow's immobilized capital, which were originally held in securities but have now largely been converted into cash. That capital is an asset of Euroclear located within the European Central Bank.

Brussels' executive arm acknowledges Belgium has valid worries and claims it is assured it has resolved them.

The scheme is for Belgium to be safeguarded 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, the loss would be compensated from assets belonging to Russia's own settlement agency which are in the EU.

Should Russia took legal action against Belgium itself, any decision by a Russian court would not be accepted in the EU.

In a key development, 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 expected to use an extraordinary measure under Article 122 of the EU Treaties so the assets stay blocked as long as an "immediate threat to the economic interests of the union" continues.

The Reasons Belgium is Not Yet Convinced

Brussels is adamant it remains a strong supporter of Ukraine, but identifies juridical dangers in the plan and worries about being forced to deal with the consequences if things fail.

A usually divided political landscape in this case has united behind Prime Minister Bart de Wever, who is facing pressure from other European officials.

"Belgium has a modest-sized economy. Belgian GDP is around €565bn – consider if it would need to shoulder a €185bn bill," notes Veerle Colaert, professor of financial law at KU Leuven University.

Although the EU might be able to arrange enough assurances for the loan itself, Belgium is concerned about an added risk of being subject to extra fines or liabilities.

Prof Colaert also argues the stipulation for Euroclear to grant a loan to the EU would breach EU banking regulations.

"Lenders need to follow prudential rules and shouldn't make one enormous loan. Now the EU is asking Euroclear to do just that.

"Why do we have these bank rules? It's because we want banks to be solvent. And if things turn sour it would fall to Belgium to save Euroclear. That's another reason why it's so crucial for Belgium to obtain absolute guarantees for Euroclear."

Europe Facing Strain from Every Direction

The situation is urgent, warn seven EU member states including those closest to Russia such as the Baltics, Finland and Poland. They maintain the scheme involving immobilized capital is "a economically realistic and politically achievable solution".

"It is a decisive moment for us," warns leading German conservative MP Norbert Röttgen. "If we fail, I don't know what we'll do next. That's why we have to finalize the deal in a week's time".

While Russia is insistent its money should not be accessed, there are added concerns among leaders in Europe that the US may want to employ Russia's immobilized billions for another purpose, as part of its own peace initiative.

Zelensky has stated Ukraine is working with Europe and the US on a recovery fund, but he is also cognizant the US has been talking to Russia about future co-operation.

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