Moscow Responds at Europe's Plan to Lend Frozen Russian Funds to Ukraine

Ukraine is facing a severe shortage of funding to keep going its armed forces and economy afloat, after close to 48 months of full-scale conflict with Russia.

In the view of European leaders, the remedy to filling Kyiv's financial shortfall of €135.7bn for the coming 24 months rests with frozen Russian assets held by Belgian bank Euroclear, and Brussels hope to sign that off at their Brussels summit next week.

Russian officials warn the EU plan would be an act of theft, and Russia's central bank declared on Friday it was initiating legal action against Euroclear in a Moscow court prior to a conclusive plan is made.

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

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

Brussels and Kyiv maintain that that capital should be used to reconstruct what Russia has laid waste to: Brussels terms it a "loan for reparations" and has devised a plan to bolster Ukraine's economy to the tune of €90bn.

"It's only fair that the assets frozen from Russia should be used to rebuild what Russia has destroyed – and that those funds then becomes Ukraine's," says Ukrainian President Volodymyr Zelensky.

Germany's leader Friedrich Merz says the assets will "help Ukraine to defend itself effectively against any future Russian attacks".

Moscow's lawsuit was anticipated in Brussels. But it is not only Moscow that is unhappy.

Belgium is anxious it will be saddled with an huge bill if it all fails, and Euroclear chief executive Valérie Urbain warns using the assets could "disrupt the global financial architecture".

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

Belgium's PM Bart de Wever has presented the EU with a series of "rational, reasonable, and justified conditions" before he will agree to the reconstruction loan scheme, and he has not excluded legal action if it "poses significant risks" for his country.

What is the EU's Strategy?

The EU is racing against time before next Thursday's summit to finalize a solution that Belgium can agree to.

Previously the EU has held off using the assets themselves directly but for the past year has directed the "windfall profits" from them to Ukraine. In 2024 that amounted to €3.7bn. From a legal standpoint, using the revenue is seen as permissible as Russia is sanctioned and the proceeds are not Russian sovereign property.

But global military support for Ukraine has declined sharply in 2025, and Europe has found it difficult to cover the shortfall resulting from the US decision to all but stop funding Ukraine under President Donald Trump.

There are at the moment two EU options designed to supplying Ukraine with €90bn, to cover a majority of its funding needs.

• One is to raise the money on financial markets, backed by the EU budget as a guarantee. This is Belgium's favored solution but it requires a consensus by EU leaders and that would be difficult when two member states are against funding Ukraine's military.
• That leaves lending Ukraine cash from the Moscow's immobilized capital, which were originally held in bonds but have now largely matured into cash. That money is Euroclear property located within the European Central Bank.

The EU's executive acknowledges Belgium has valid worries and states it is convinced it has dealt with them.

The plan is for Belgium to be protected 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, that would be offset from assets belonging to Russia's own clearing house which are in the EU.

If Russia targeted Belgium itself, any decision 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.

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

The EU ambassadors are planning to use an extraordinary measure under Article 122 of the EU Treaties so the assets remain frozen as long as an "clear risk to the economic security of the union" continues.

The Reasons Belgium is Not Yet On Board

Belgium is firm it remains a strong supporter of Ukraine, but sees juridical dangers in the plan and fears being left to handle the consequences if things do not work out.

A typically fractured political scene in this case has united behind Prime Minister Bart de Wever, who is under pressure from European colleagues.

"Belgium is a small economy. Belgian GDP is around €565bn – think about if it would need to carry a €185bn bill," comments Veerle Colaert, expert in financial law at KU Leuven University.

While the EU might be able to arrange sufficient protections for the loan itself, Belgium is concerned about an added risk of being vulnerable 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 adhere to prudential rules and shouldn't put all their eggs in one basket. 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 go wrong it would fall to Belgium to save Euroclear. That's an additional reason why it's so important for Belgium to secure ironclad guarantees for Euroclear."

EU Leaders Facing Strain from Multiple Fronts

The situation is urgent, warn seven 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 politically realistic solution".

"This is a crucial test for us," warns leading German conservative MP Norbert Röttgen. "If we fail, I don't know what we'll do subsequently. That's why we have to reach an agreement in a week's time".

Although Russia is unyielding its money should not be used, there are added concerns among European figures that the US may want to employ Russia's immobilized billions for another purpose, as part of its own peace plan.

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

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