Moscow Hits Back at the EU's Plan to Loan Frozen Russian Cash to Kyiv

Kyiv remains facing a severe shortage of cash to maintain its armed forces and economy afloat, after nearly four years of the ongoing invasion by Moscow.

For Europe, the solution to filling Ukraine's financial shortfall of €135.7bn for the next two years is found in assets belonging to Russia that are frozen located within Belgian bank Euroclear, and EU leaders seek to give it the green light at their meeting in Brussels next week.

Authorities in Russia state the EU plan would be an act of theft, and Russia's central bank announced on Friday it was initiating legal action against Euroclear in a Moscow court ahead of a definitive agreement is made.

'Appropriate' to Use Russia's Funds, Argue European and Ukrainian Officials

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

Brussels and Kyiv argue that that capital should be used to reconstruct what Russia has laid waste to: Brussels calls it a "loan for reparations" and has come up with a plan to support Ukraine's economy amounting to €90bn.

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

Chancellor Friedrich Merz argues the assets will "help Ukraine to shield itself successfully against subsequent Russian attacks".

Moscow's lawsuit was foreseen in Brussels. But it is not just Moscow that is dissatisfied.

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

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 accept the reparations plan, and he has refused to rule out legal action if it "carries significant risks" for his country.

Explaining the EU's Proposal?

The EU is working to the wire prior to next Thursday's summit to come up with a solution that Belgium can support.

Until now the EU has held off accessing the principal funds directly but starting in 2024 has paid the "excess income" from them to Ukraine. In 2024 that amounted to €3.7bn. Legally, using the revenue is considered permissible as Russia is sanctioned and the proceeds are not Russian sovereign property.

But international military aid for Ukraine has slipped dramatically in 2025, and Europe has struggled to make up the deficit left by the US decision to largely cease funding Ukraine under President Donald Trump.

There are currently two EU proposals seeking to furnishing Ukraine with €90bn, to finance a majority of its funding needs.

• Option one is to borrow the funds on financial markets, guaranteed by the EU budget as a surety. This is Belgium's favored solution but it requires a agreement by all by EU leaders and that would be problematic when Hungary and Slovakia object to funding Ukraine's military.
• This makes the other option providing a loan of Ukraine cash from the Russian assets, which were initially held in bonds but have now largely turned into cash. That capital is an asset of Euroclear held in the European Central Bank.

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

The plan is for Belgium to be shielded with a assurance encompassing 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.

Should Russia went after 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 freeze indefinitely Russia's central bank assets held in Europe for the foreseeable future.

Until now they have had to vote all together every six months to renew 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 remain frozen as long as an "direct danger to the economic interests of the union" continues.

The Reasons Belgium is Not Yet On Board

The Belgian government is insistent it remains a strong supporter of Ukraine, but identifies juridical dangers in the plan and worries about being left to handle the fallout if things fail.

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

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

Although the EU might be able to obtain enough guarantees for the loan itself, Belgium fears an additional danger of being vulnerable to extra legal costs.

Prof Colaert also argues the stipulation for Euroclear to grant a loan to the EU would contravene EU banking regulations.

"Financial institutions need to follow prudential rules and shouldn't make one enormous loan. Now the EU is instructing Euroclear to do exactly that.

"Why do we have these banking laws? It's because we want banks to be solvent. And if things fail it would fall to Belgium to save Euroclear. That's a further cause why it's so important for Belgium to obtain ironclad assurances for Euroclear."

The European Union In a Difficult Position from Every Direction

There is no time to lose, state seven EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They believe the proposal to use Russian funds is "a financially feasible and politically achievable solution".

"It is a decisive moment for us," warns 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 reach an agreement in a week's time".

While Russia is insistent its money should not be used, there are additional apprehensions among EU officials that the US may want to deploy Russia's blocked funds in another way, as part of its own peace initiative.

Zelensky has indicated Ukraine is coordinating with Europe and the US on a rebuilding fund, but he is also aware the US has been engaging with Russia about possible partnership.

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