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

Ukraine is depleting its funding to sustain its military and economy, after almost four years of the ongoing invasion by Moscow.

For Europe, the solution to addressing Kyiv's funding gap of €135.7bn for the following biennium lies in assets belonging to Russia that are frozen sitting in Belgian bank Euroclear, and EU leaders hope to sign that off at their meeting in Brussels next week.

Russian officials warn 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 ahead of a conclusive plan is made.

'Only Fair' to Utilize Russia's Funds, Assert European and Ukrainian Officials

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

Brussels and Kyiv argue that that capital should be used to restore what Russia has devastated: EU officials refers to it as a "reconstruction loan" and has devised a plan to prop up Ukraine's economy amounting to €90bn.

"It's only fair that the assets frozen from Russia should be used to reconstruct what Russia has destroyed – and that that capital then becomes Ukraine's," states Ukraine's Volodymyr Zelensky.

German Chancellor Friedrich Merz says the assets will "enable Ukraine to defend itself efficiently against any future Russian attacks".

Moscow's lawsuit was expected in Brussels. But it is not just Moscow that is unhappy.

Belgium is worried it will be left with an massive bill if it all fails, and Euroclear CEO Valérie Urbain argues 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 presented the EU with a series of "logical, sensible, and warranted conditions" before he will endorse the reparations plan, and he has not excluded legal action if it "carries significant risks" for his country.

What is the EU's Plan?

European Union officials is working to the wire ahead of next Thursday's summit to finalize a compromise that Belgium can accept.

Previously the EU has held off touching the frozen capital directly but since last year has transferred the "windfall profits" from them to Ukraine. In 2024 that amounted to €3.7bn. From a legal standpoint, using the profits is deemed safe 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 had trouble trying to cover the deficit resulting from the US decision to virtually halt funding Ukraine under President Donald Trump.

There are at the moment two EU options aimed at supplying Ukraine with €90bn, to cover two-thirds of its budgetary necessities.

• One is to raise the money on the markets, backed by the EU budget as a surety. This is Belgium's favored solution but it requires a unanimous vote by EU leaders and that would be problematic when Hungary and Slovakia oppose funding Ukraine's military.
• The alternative is providing a loan of Ukraine cash from the frozen Russian funds, which were originally held in financial instruments but have now predominantly matured into cash. That funding is Euroclear property deposited at the European Central Bank.

The European Commission recognizes Belgium has justified fears and states it is confident 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.

Should Russia went after Belgium itself, any decision by a Russian court would not be recognized 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 for the foreseeable future.

Heretofore they have had to vote unanimously every six months to renew the freeze, which could have meant a constant risk to Belgium.

The EU ambassadors are expected 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 economic security of the union" continues.

The Reasons Belgium is Still Not Convinced

The Belgian government is adamant it remains a staunch ally of Ukraine, but perceives legal risks in the plan and worries about being shouldering the consequences if things do not work out.

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

"The Belgian economy is not large. Belgian GDP is about €565bn – consider if it would need to shoulder a €185bn bill," notes Veerle Colaert, academic specializing in financial regulation at KU Leuven University.

While the EU might be able to obtain adequate protections for the loan itself, Belgium is concerned about an further exposure of being exposed to extra fines or liabilities.

Prof Colaert also believes the requirement for Euroclear to provide a loan to the EU would contravene EU banking regulations.

"Financial institutions need to comply with capital and liquidity requirements and shouldn't concentrate risk. 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 secure. And if things turn sour it would be up to Belgium to rescue Euroclear. That's an additional reason why it's so vital for Belgium to secure absolute assurances for Euroclear."

Europe Under Pressure from All Sides

The situation is urgent, caution seven EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They argue the proposal to use Russian funds is "the most economically realistic and politically realistic solution".

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

While Russia is insistent its money should not be accessed, there are additional apprehensions among European figures that the US may want to deploy Russia's frozen billions differently, as part of its own peace plan.

Zelensky has said Ukraine is working with Europe and the US on a reconstruction fund, but he is also aware the US has been engaging with Russia about possible partnership.

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