Russia Retaliates at the EU's Scheme to Loan Frozen Moscow's Assets to Ukraine

Kyiv remains running out of cash to maintain its armed forces and economy afloat, after nearly four years of Russia's full-scale war.

In the view of European leaders, the answer to addressing Ukraine's budget hole of €135.7bn for the next two years is found in frozen Russian assets held by Belgian bank Euroclear, and Brussels aim to finalize the plan at their Brussels summit next week.

Moscow's representatives state the EU plan would be an illegal seizure, and the Central Bank of Russia stated on Friday it was initiating legal action against Euroclear in a Moscow court ahead of a definitive agreement is made.

'Just' to Utilize Moscow's Funds, Say Ukraine and the EU

All told, Russia has roughly €210bn of its assets blocked in the EU, and €185bn of that is held by Euroclear.

Brussels and Kyiv maintain that that capital should be used to reconstruct what Russia has devastated: The European Commission terms it a "reparations loan" and has proposed a plan to support Ukraine's economy amounting to €90bn.

"It is appropriate that Russia's frozen assets should be used to reconstruct what Russia has destroyed – and that that capital then becomes ours," says Ukrainian President Volodymyr Zelensky.

Germany's leader Friedrich Merz states the assets will "enable Ukraine to shield itself efficiently against subsequent Russian attacks".

Moscow's lawsuit was expected in Brussels. But it is not only Moscow that is dissatisfied.

Authorities in Brussels is concerned it will be burdened by an massive bill if it all fails, and Euroclear chief executive Valérie Urbain says using the assets could "destabilise the world's financial order".

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

Belgium's PM Bart de Wever has set the EU a series of "logical, sensible, and warranted 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 Strategy?

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

So far the EU has refrained from using the assets themselves directly but for the past year has paid the "extraordinary revenues" from them to Ukraine. In 2024 that totaled €3.7bn. Legally, using the interest is deemed permissible as Russia is under sanction and the earnings are not Moscow's sovereign assets.

But international military aid for Ukraine has fallen significantly in 2025, and Europe has found it difficult to make up the gap caused by the US decision to virtually halt funding Ukraine under President Donald Trump.

There are currently two EU plans seeking to furnishing Ukraine with €90bn, to pay for a majority of its budgetary necessities.

• The first is to secure the capital on capital markets, backed by the EU budget as a guarantee. This is Belgium's preferred option but it requires a consensus by EU leaders and that would be difficult when Hungary and Slovakia are against funding Ukraine's military.
• The alternative is providing a loan of Ukraine cash from the Moscow's immobilized capital, which were initially held in securities but have now largely matured into cash. That money is Euroclear property held in the European Central Bank.

The EU's executive recognizes Belgium has justified fears and says it is assured it has resolved them.

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

If Euroclear suffer a loss 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.

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

In a significant move, EU ambassadors are expected to agree on Friday to immobilise Russia's central bank assets held in Europe indefinitely.

Until now they have had to vote all together every six months to continue the freeze, which could have meant a constant risk to Belgium.

The EU ambassadors are set to use an special provision under Article 122 of the EU Treaties so the assets continue to be immobilized as long as an "clear risk to the economic interests of the union" continues.

Why Belgium is Not Yet Satisfied

Brussels is adamant it remains a staunch ally of Ukraine, but perceives legal risks in the plan and fears being forced to deal with the fallout if things fail.

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

"Belgium has a modest-sized economy. Belgian GDP is around €565bn – consider if it would need to bear a €185bn bill," says 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 further exposure of being subject to extra fines or liabilities.

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

"Lenders need to comply with prudential rules and shouldn't concentrate risk. Now the EU is telling Euroclear to do just that.

"Why do we have these bank rules? It's because we want banks to be stable. And if things turn sour it would be up to Belgium to save Euroclear. That's a further cause why it's so important for Belgium to get absolute assurances for Euroclear."

Europe Facing Strain from Every Direction

There is no time to lose, caution several EU member states including those closest to Russia such as the Baltics, Finland and Poland. They maintain the proposal to use Russian funds is "a economically realistic and practically possible solution".

"This is a crucial test for us," warns leading German conservative MP Norbert Röttgen. "Should we not succeed, I don't know what we'll do next. That's why we have to succeed in a week's time".

Although Russia is insistent its money should not be touched, there are additional apprehensions among leaders in Europe that the US may want to employ Russia's frozen billions in another way, as part of its own diplomatic proposal.

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

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