Russia Retaliates at the EU's Plan to Lend Immobilized Moscow's Funds to Ukraine

Kyiv remains facing a severe shortage of cash to sustain its armed forces and economy, after nearly four years of Russia's full-scale war.

For Europe, the solution to plugging Ukraine's funding gap of €135.7bn for the next two years rests with assets belonging to Russia that are frozen sitting in Belgian bank Euroclear, and Brussels seek to give it the green light at their Brussels summit next week.

Authorities in Russia state the EU plan would be an confiscation, and Moscow's monetary authority stated on Friday it was initiating legal action against Euroclear in a Moscow court ahead of a final decision is made.

'Only Fair' to Use Moscow's Funds, Argue Kyiv and Brussels

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

European and Ukrainian authorities contend that that capital should be used to reconstruct what Russia has devastated: The European Commission refers to it as a "loan for reparations" and has come up with a plan to prop up Ukraine's economy amounting to €90bn.

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

German Chancellor Friedrich Merz states the assets will "enable Ukraine to shield itself successfully against future Russian attacks".

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

The Belgian government is concerned it will be saddled with an enormous bill if it all backfires, and Euroclear head Valérie Urbain says using the assets could "disrupt the world's financial order".

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

Belgian Prime Minister Bart de Wever has given Brussels a series of "rational, reasonable, and justified conditions" before he will agree to the reparations plan, and he has refused to rule out legal action if it "poses significant risks" for his country.

Explaining the EU's Plan?

The EU is racing against time prior to next Thursday's summit to come up with a solution that Belgium can support.

Until now the EU has avoided accessing the assets themselves directly but starting in 2024 has transferred the "windfall profits" from them to Ukraine. In 2024 that amounted to €3.7bn. Legally, using the interest is considered less risky as Russia is under sanction and the proceeds are not property of the Russian state.

But global military support for Ukraine has fallen significantly in 2025, and Europe has found it difficult to compensate for the gap left by the US decision to all but stop funding Ukraine under President Donald Trump.

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

• One is to raise the money on capital markets, secured against the EU budget as a surety. This is Belgium's favored solution but it needs a consensus by EU leaders and that would be difficult when Budapest and Bratislava are against funding Ukraine's military.
• The alternative is lending Ukraine cash from the Russian assets, which were at first held in securities but have now mostly turned into cash. That capital is Euroclear property located within the European Central Bank.

Brussels' executive arm acknowledges Belgium has valid worries and states it is assured it has dealt with them.

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

Should Euroclear suffer a loss 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.

In the event that Russia took legal action against Belgium itself, any ruling by a Russian court would not be recognized in the EU.

As an important step, EU ambassadors are poised to endorse on Friday to immobilise Russia's central bank assets held in Europe indefinitely.

Heretofore 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 extraordinary measure under Article 122 of the EU Treaties so the assets stay blocked as long as an "direct danger to the economic interests of the union" continues.

The Reasons Belgium is Still Not Satisfied

The Belgian government is insistent it remains a staunch ally of Ukraine, but sees juridical dangers in the plan and is concerned about being left to handle the repercussions if things fail.

A normally fractured political scene in this case has rallied behind Prime Minister Bart de Wever, who is facing pressure from European colleagues.

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

While the EU might be able to arrange sufficient guarantees for the loan itself, Belgium fears an added risk of being subject to extra fines or liabilities.

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

"Financial institutions need to comply with prudential rules and shouldn't concentrate risk. Now the EU is instructing Euroclear to do exactly that.

"What is the purpose of these banking laws? It's because we want banks to be secure. And if things turn sour it would become the responsibility of Belgium to bail out Euroclear. That's an additional reason why it's so important for Belgium to obtain water-tight assurances for Euroclear."

The European Union In a Difficult Position from All Sides

The situation is urgent, state seven EU member states including those closest to Russia such as the Baltics, Finland and Poland. They believe the proposal to use Russian funds is "a fiscally viable and politically achievable solution".

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

While Russia is adamant its money should not be used, there are added concerns among EU officials that the US may want to use Russia's frozen billions for another purpose, as part of its own diplomatic proposal.

Zelensky has stated Ukraine is in discussions with Europe and the US on a rebuilding fund, but he is also cognizant the US has been engaging with Russia about future co-operation.

An early draft of the US peace plan referred to $100bn of Russia's blocked funds being used by the US for reconstruction, with the US {taking|receiving