Russia Hits Back at Europe's Proposal to Lend Frozen Moscow's Funds to Kyiv

Kyiv remains depleting its cash to sustain its armed forces and economy afloat, after almost four years of Russia's full-scale war.

In the view of European leaders, the remedy to plugging Kyiv's funding gap of €135.7bn for the coming 24 months is found in assets belonging to Russia that are frozen sitting in Belgian bank Euroclear, and European Union officials hope to give it the green light at their EU leaders' conference next week.

Moscow's representatives state the EU plan would be an act of theft, and the Central Bank of Russia stated on Friday it was suing Euroclear in a Moscow court ahead of a final decision is made.

'Only Fair' to Use Moscow's Assets, Say Ukraine and the EU

In total, Russia has about €210bn of its funds blocked in the EU, and €185bn of that is held by Euroclear.

The EU and Ukraine argue that that capital should be used to rebuild what Russia has laid waste to: The European Commission calls it a "reconstruction loan" and has come up with a plan to support Ukraine's economy amounting to €90bn.

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

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

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

The Belgian government is anxious it will be burdened by an huge bill if it all fails, and Euroclear CEO Valérie Urbain says using the assets could "destabilise the international financial system".

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

Belgian Prime Minister Bart de Wever has set the EU a series of "rational, reasonable, and justified conditions" before he will endorse the reconstruction loan scheme, and he has refused to rule out legal action if it "poses significant risks" for his country.

Explaining the EU's Proposal?

The EU is under pressure before next Thursday's summit to finalize a solution that Belgium can support.

So far the EU has refrained from accessing the principal funds directly but for the past year has paid the "excess income" from them to Ukraine. In 2024 that totaled €3.7bn. Juridically, using the revenue is considered less risky as Russia is sanctioned and the proceeds are not Moscow's sovereign assets.

But foreign defense assistance for Ukraine has slipped dramatically in 2025, and Europe has found it difficult to compensate for the deficit left by the US decision to largely cease funding Ukraine under President Donald Trump.

There are at the moment two EU plans seeking to furnishing Ukraine with €90bn, to pay for a majority of its financial requirements.

• One is to borrow the funds on the markets, secured against the EU budget as a collateral. This is Belgium's first choice but it needs a consensus by EU leaders and that would be challenging when two member states object to funding Ukraine's military.
• That leaves providing a loan of Ukraine cash from the Russian assets, which were initially held in financial instruments but have now predominantly been converted into cash. That capital is owned by Euroclear held in the European Central Bank.

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

The plan is for Belgium to be shielded with a insurance covering all the €210bn of Russian assets in the EU.

If Euroclear face a financial hit of its own assets in Russia, the shortfall would be covered from assets belonging to Russia's own settlement agency which are in the EU.

If Russia targeted Belgium itself, any decision by a Russian court would not be accepted in the EU.

In a key development, EU ambassadors are poised to endorse on Friday to immobilise Russia's central bank assets held in Europe for the foreseeable future.

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

The EU ambassadors are set to use an emergency clause under Article 122 of the EU Treaties so the assets continue to be immobilized as long as an "direct danger to the economic security of the union" continues.

Why Belgium is Still Not Convinced

The Belgian government is firm it remains a staunch ally of Ukraine, but identifies juridical dangers in the plan and worries about being shouldering the consequences if things do not work out.

A normally partisan political environment in this case has come together in support of Prime Minister Bart de Wever, who is facing pressure from fellow EU leaders.

"Belgium is a small 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.

Although the EU might be able to arrange enough protections for the loan itself, Belgium is concerned about an added risk 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.

"Financial institutions need to follow stability regulations and shouldn't put all their eggs in one basket. Now the EU is asking Euroclear to do just that.

"What is the purpose of these banking laws? It's because we want banks to be solvent. And if things go wrong it would become the responsibility of Belgium to rescue Euroclear. That's an additional reason why it's so important for Belgium to get water-tight assurances for Euroclear."

The European Union Under Pressure from Every Direction

Time is of the essence, caution several EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They maintain the frozen assets plan is "the economically realistic and practically possible solution".

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

While Russia is unyielding its money should not be touched, there are additional apprehensions among European figures that the US may want to use Russia's blocked funds in another way, as part of its own peace plan.

Zelensky has said Ukraine is coordinating with Europe and the US on a reconstruction fund, but he is also cognizant the US has been holding discussions with Russia about potential collaboration.

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