Russia Hits Back at the EU's Plan to Lend Frozen Russian Funds to Ukraine

Kyiv remains running out of financial resources to maintain its armed forces and economy, after nearly four years of full-scale conflict with Russia.

From the EU's perspective, the remedy to plugging Kyiv's financial shortfall of €135.7bn for the following biennium is found in assets belonging to Russia that are frozen sitting in Belgian bank Euroclear, and European Union officials hope to sign that off at their EU leaders' conference next week.

Moscow's representatives warn the EU plan would be an confiscation, and Moscow's monetary authority declared on Friday it was initiating legal action against Euroclear in a Moscow court even before a conclusive plan is made.

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

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

Brussels and Kyiv argue that money should be used to rebuild what Russia has devastated: The European Commission refers to it as a "reparations loan" and has proposed a plan to bolster Ukraine's economy amounting to €90bn.

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

German Chancellor Friedrich Merz argues the assets will "help Ukraine to defend itself successfully against future Russian attacks".

The legal move by Moscow was foreseen in Brussels. But it is not just Moscow that is concerned.

Belgium is anxious it will be saddled with an huge bill if it all fails, and Euroclear CEO Valérie Urbain warns using the assets could "destabilise the international financial system".

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

Belgian Prime Minister 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 left open the possibility of legal action if it "presents significant risks" for his country.

The Details of the EU's Proposal?

European Union officials is working to the wire before next Thursday's summit to agree on a compromise that Belgium can agree to.

So far the EU has refrained from accessing the frozen capital directly but since last year has paid the "excess income" from them to Ukraine. In 2024 that amounted to €3.7bn. Legally, using the interest is considered permissible as Russia is subject to sanctions and the returns are not property of the Russian state.

But international military aid for Ukraine has fallen significantly in 2025, and Europe has had trouble trying to compensate for the gap resulting from the US decision to largely cease funding Ukraine under President Donald Trump.

There are currently two EU proposals seeking to providing Ukraine with €90bn, to cover two-thirds of its funding needs.

• The first is to raise the money on capital markets, backed by the EU budget as a guarantee. This is Belgium's preferred option but it needs a consensus by EU leaders and that would be problematic when Budapest and Bratislava are against funding Ukraine's military.
• This makes the other option loaning Ukraine cash from the frozen Russian funds, which were initially held in securities but have now mostly 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 confident it has resolved them.

The plan is for Belgium to be safeguarded with a guarantee applying to all the €210bn of Russian assets in the EU.

Should Euroclear suffer a loss of its own assets in Russia, that would be offset from assets belonging to Russia's own clearing house which are in the EU.

If Russia targeted Belgium itself, any decision by a Russian court would not be accepted in the EU.

In a key development, EU ambassadors are poised to endorse on Friday to immobilise Russia's central bank assets held in Europe indefinitely.

Until now they have had to vote by consensus every six months to extend the freeze, which could have meant a ongoing risk to Belgium.

The EU ambassadors are expected to use an extraordinary measure under Article 122 of the EU Treaties so the assets remain frozen as long as an "immediate threat to the economic security of the union" continues.

Why Belgium is Still Not Satisfied

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

A usually divided political landscape in this case has come together in support of Prime Minister Bart de Wever, who is being pressured from other European officials.

"Belgium has a modest-sized economy. Belgian GDP is approximately €565bn – think about if it would need to carry a €185bn bill," notes 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 is concerned about an additional danger of being subject to extra damages or penalties.

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

"Financial institutions need to follow stability regulations and shouldn't make one enormous loan. Now the EU is instructing Euroclear to do just that.

"What is the purpose of these banking laws? It's because we want banks to be solvent. 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 get absolute assurances for Euroclear."

The European Union Under Pressure from Every Direction

There is no time to lose, warn several EU member states including those bordering Russia such as the Baltics, Finland and Poland. They maintain the scheme involving immobilized capital is "a financially feasible and practically possible solution".

"It's a matter of destiny 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 succeed in a week's time".

While Russia is unyielding its money should not be touched, there are added concerns among EU officials that the US may want to employ Russia's immobilized billions in another way, as part of its own peace plan.

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

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