Moscow Retaliates at the EU's Scheme to Loan Immobilized Russian Funds to Ukraine

Kyiv remains facing a severe shortage of financial resources to maintain its military and economy, after nearly four years of the ongoing invasion by Moscow.

In the view of European leaders, the remedy to addressing Ukraine's budget hole of €135.7bn for the next two years 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.

Authorities in Russia warn 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 final decision is made.

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

Overall, Russia has roughly €210bn of its funds blocked in the EU, and €185bn of that is held 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 to the tune of €90bn.

"It is only just that Russia's frozen assets should be used to rebuild what Russia has devastated – and that those funds then becomes Ukraine's," states Ukraine's Volodymyr Zelensky.

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

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

Authorities in Brussels is worried it will be burdened by an massive bill if it all backfires, and Euroclear head Valérie Urbain warns using the assets could "destabilise the international financial system".

Euroclear also has an roughly €16-17bn locked in Russia.

The leader of Belgium Bart de Wever has set the EU a series of "pragmatic, fair, and legitimate conditions" before he will agree to the reparations plan, and he has not excluded legal action if it "carries significant risks" for his country.

Explaining the EU's Proposal?

Brussels is racing against time before next Thursday's summit to agree on a solution that Belgium can support.

So far the EU has avoided accessing the assets themselves directly but for the past year has directed the "excess income" from them to Ukraine. In 2024 that amounted to €3.7bn. Juridically, using the interest is seen as safe as Russia is subject to sanctions and the returns are not Russian sovereign property.

But foreign defense assistance for Ukraine has declined sharply in 2025, and Europe has struggled to cover the deficit left by the US decision to virtually halt funding Ukraine under President Donald Trump.

There are currently two EU plans aimed at supplying Ukraine with €90bn, to cover a majority of its funding needs.

• The first is to borrow the funds on capital markets, secured against the EU budget as a collateral. This is Belgium's first choice but it demands a consensus by EU leaders and that would be problematic when two member states object to funding Ukraine's military.
• This makes the other option loaning Ukraine cash from the frozen Russian funds, which were originally held in bonds but have now largely been converted into cash. That capital is owned by Euroclear located within the European Central Bank.

The EU's executive acknowledges Belgium has valid worries and says it is confident it has resolved them.

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

If Euroclear incur losses of its own assets in Russia, the loss would be compensated 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 poised to endorse on Friday to permanently block Russia's central bank assets held in Europe indefinitely.

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

The EU ambassadors are expected to use an emergency clause under Article 122 of the EU Treaties so the assets stay blocked as long as an "clear risk to the financial well-being of the union" continues.

The Reasons Belgium is Remains Satisfied

Brussels is firm it remains a staunch ally of Ukraine, but identifies regulatory pitfalls in the plan and is concerned about being forced to deal with the repercussions if things fail.

A usually partisan political environment in this case has rallied behind Prime Minister Bart de Wever, who is under pressure from European colleagues.

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

Although the EU might be able to obtain enough guarantees for the loan itself, Belgium is concerned about an additional danger of being exposed to extra fines or liabilities.

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

"Financial institutions need to comply with capital and liquidity requirements and shouldn't put all their eggs in one basket. Now the EU is asking Euroclear to do exactly that.

"What is the purpose of these financial regulations? It's because we want banks to be solvent. And if things go wrong it would fall to Belgium to bail out Euroclear. That's a further cause why it's so crucial for Belgium to get absolute guarantees for Euroclear."

EU Leaders Under Pressure from All Sides

The situation is urgent, state a group of EU member states including those closest to Russia such as the Baltics, Finland and Poland. They argue the scheme involving immobilized capital is "a financially feasible and politically achievable solution".

"This is a crucial test for us," warns 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 reach an agreement in a week's time".

Although Russia is insistent its money should not be accessed, there are additional apprehensions among European figures that the US may want to use Russia's immobilized billions for another purpose, as part of its own diplomatic proposal.

Zelensky has said Ukraine is in discussions with Europe and the US on a reconstruction fund, but he is also mindful the US has been holding discussions with Russia about possible partnership.

A preliminary version of the US peace plan mentioned $100bn of Russia's frozen assets being used by the US for reconstruction, with the US {taking|receiving