Russia Hits Back at Europe's Scheme to Lend Frozen Moscow's Assets to Kyiv

Ukraine is facing a severe shortage of financial resources to maintain 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 funding gap of €135.7bn for the next two years rests with frozen Russian assets located within Belgian bank Euroclear, and EU leaders seek to finalize the plan at their Brussels summit next week.

Russian officials state the EU plan would be an illegal seizure, and Moscow's monetary authority announced on Friday it was initiating legal action against Euroclear in a Moscow court prior to a final decision is made.

'Only Fair' to Employ Russia's Assets, Assert European and Ukrainian Officials

Overall, Russia has approximately €210bn of its state reserves frozen in the EU, and €185bn of that is in the custody of Euroclear.

The EU and Ukraine maintain that those funds should be used to rebuild what Russia has destroyed: EU officials terms it a "loan for reparations" and has devised a plan to bolster Ukraine's economy valued at €90bn.

"It's only fair 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.

German Chancellor Friedrich Merz says the assets will "allow Ukraine to defend itself successfully against future Russian attacks".

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

The Belgian government is worried it will be burdened by an enormous bill if it all goes wrong, and Euroclear chief executive Valérie Urbain says using the assets could "disrupt 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 "logical, sensible, and warranted conditions" before he will endorse the reparations plan, and he has left open the possibility of legal action if it "poses significant risks" for his country.

Explaining the EU's Proposal?

Brussels is under pressure prior to next Thursday's summit to agree on a compromise that Belgium can support.

Previously the EU has avoided accessing the assets themselves directly but since last year has directed the "windfall profits" from them to Ukraine. In 2024 that was €3.7bn. Legally, using the interest is considered safe as Russia is subject to sanctions and the proceeds are not Moscow's sovereign assets.

But international military aid for Ukraine has fallen significantly in 2025, and Europe has had trouble trying to compensate for the shortfall left by the US decision to all but stop funding Ukraine under President Donald Trump.

There are presently two EU options seeking to providing Ukraine with €90bn, to cover two-thirds 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 favored solution but it requires a consensus by EU leaders and that would be difficult when Budapest and Bratislava oppose funding Ukraine's military.
• The alternative is lending Ukraine cash from the Moscow's immobilized capital, which were initially held in financial instruments but have now predominantly turned into cash. That funding is owned by Euroclear located within the European Central Bank.

The European Commission recognizes Belgium has valid worries and claims it is confident it has resolved them.

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

Should Euroclear incur losses 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 targeted Belgium itself, any ruling by a Russian court would not be enforced in the EU.

As an important step, EU ambassadors are expected to agree 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 planning to use an special provision under Article 122 of the EU Treaties so the assets continue to be immobilized as long as an "direct danger to the financial well-being of the union" continues.

The Reasons Belgium is Remains Convinced

The Belgian government is adamant it remains a committed partner of Ukraine, but sees legal risks in the plan and worries about being forced to deal with the fallout if things go wrong.

A usually divided political landscape 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 about €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 obtain enough assurances for the loan itself, Belgium is concerned about an further exposure of being exposed to extra legal costs.

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

"Lenders need to comply with stability regulations and shouldn't put all their eggs in one basket. Now the EU is telling Euroclear to do just that.

"What is the purpose of these banking laws? It's because we want banks to be stable. And if things turn sour it would become the responsibility of Belgium to rescue Euroclear. That's another reason why it's so important for Belgium to get absolute protections for Euroclear."

The European Union In a Difficult Position from Multiple Fronts

Time is of the essence, warn 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 "the financially feasible and politically achievable solution".

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

While Russia is insistent its money should not be accessed, there are further worries among EU officials that the US may want to deploy Russia's immobilized billions differently, as part of its own diplomatic proposal.

Zelensky has stated Ukraine is coordinating with Europe and the US on a reconstruction fund, but he is also aware the US has been talking to Russia about possible partnership.

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