Russia Retaliates at the EU's Proposal to Loan Frozen Moscow's Assets to Kyiv

Ukraine is depleting its cash to maintain its armed forces and economy afloat, after close to 48 months of full-scale conflict with Russia.

From the EU's perspective, the solution to plugging Ukraine's budget hole of €135.7bn for the following biennium is found in Moscow's immobilized funds sitting in Belgian bank Euroclear, and Brussels hope to give it the green light at their EU leaders' conference next week.

Authorities in Russia state the EU plan would be an confiscation, and the Central Bank of Russia declared on Friday it was suing Euroclear in a Moscow court ahead of a conclusive plan is made.

'Appropriate' to Use Moscow's Funds, Say Ukraine and the EU

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

The EU and Ukraine maintain that money should be used to reconstruct what Russia has laid waste to: EU officials calls it a "reconstruction loan" and has proposed a plan to prop up Ukraine's economy valued at €90bn.

"It is only just that the assets frozen from Russia should be used to rebuild what Russia has destroyed – and that those funds then becomes ours," states Ukrainian President Volodymyr Zelensky.

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

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

The Belgian government is concerned it will be saddled with an massive bill if it all backfires, and Euroclear CEO Valérie Urbain argues using the assets could "undermine the global financial architecture".

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

The leader of Belgium Bart de Wever has presented the EU with a series of "pragmatic, fair, and legitimate conditions" before he will accept the reparations plan, and he has refused to rule out legal action if it "presents significant risks" for his country.

The Details of the EU's Plan?

European Union officials is racing against time before next Thursday's summit to come up with a solution that Belgium can accept.

So far the EU has held off touching the principal funds directly but for the past year has directed the "extraordinary revenues" from them to Ukraine. In 2024 that was €3.7bn. Juridically, using the revenue is deemed safe as Russia is sanctioned and the proceeds are not property of the Russian state.

But international military aid for Ukraine has declined sharply in 2025, and Europe has had trouble trying to compensate for the gap left by the US decision to virtually halt funding Ukraine under President Donald Trump.

There are at the moment two EU proposals seeking to providing Ukraine with €90bn, to cover a majority of its financial requirements.

• The first is to raise the money on financial markets, backed by the EU budget as a surety. This is Belgium's preferred option but it requires a unanimous vote by EU leaders and that would be problematic when two member states object to funding Ukraine's military.
• The alternative is loaning Ukraine cash from the Russian assets, which were originally held in bonds but have now predominantly turned into cash. That capital is an asset of Euroclear held in the European Central Bank.

Brussels' executive arm accepts Belgium has justified fears and claims it is assured it has resolved them.

The scheme is for Belgium to be safeguarded with a insurance covering 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 took legal action against Belgium itself, any decision by a Russian court would not be accepted in the EU.

As an important step, EU ambassadors are set to approve on Friday to permanently block Russia's central bank assets held in Europe indefinitely.

Until now 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 economic interests of the union" continues.

Why Belgium is Not Yet Satisfied

Brussels is adamant it remains a strong supporter of Ukraine, but perceives legal risks in the plan and is concerned about being left to handle the consequences if things do not work out.

A normally divided political landscape in this case has united behind Prime Minister Bart de Wever, who is facing pressure from fellow EU leaders.

"Belgium has a modest-sized economy. Belgian GDP is approximately €565bn – think about if it would need to carry a €185bn bill," says Veerle Colaert, expert in financial law at KU Leuven University.

While the EU might be able to secure enough guarantees for the loan itself, Belgium fears an further exposure of being vulnerable to extra legal costs.

Prof Colaert also argues the requirement for Euroclear to issue credit to the EU would breach EU banking regulations.

"Financial institutions need to follow prudential rules and shouldn't put all their eggs in one basket. Now the EU is instructing Euroclear to do exactly that.

"Why do we have these banking laws? It's because we want banks to be stable. And if things go wrong it would fall to Belgium to save Euroclear. That's a further cause why it's so vital for Belgium to obtain absolute guarantees for Euroclear."

EU Leaders In a Difficult Position from All Sides

The situation is urgent, warn a group of EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They argue the proposal to use Russian funds is "the financially feasible and politically achievable solution".

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

While Russia is unyielding its money should not be accessed, there are further worries among EU officials that the US may want to employ Russia's frozen billions for another purpose, as part of its own peace initiative.

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

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