Moscow Retaliates at Europe's Plan to Loan Frozen Russian Cash to Ukraine

Ukraine is facing a severe shortage of cash to maintain its military and economy afloat, after almost four years of full-scale conflict with Russia.

For Europe, the answer to plugging Kyiv's financial shortfall of €135.7bn for the coming 24 months is found in frozen Russian assets held by Belgian bank Euroclear, and EU leaders seek to sign that off at their Brussels summit next week.

Moscow's representatives state the EU plan would be an illegal seizure, and the Central Bank of Russia stated on Friday it was initiating legal action against Euroclear in a Moscow court even before a conclusive plan is made.

'Only Fair' to Employ Moscow's Assets, Assert Ukraine and the EU

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

The EU and Ukraine contend that those funds should be used to restore what Russia has devastated: EU officials refers to it as a "loan for reparations" and has come up with a plan to prop up Ukraine's economy valued at €90bn.

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

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

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

Belgium is worried it will be saddled with an huge bill if it all backfires, and Euroclear head Valérie Urbain argues using the assets could "undermine the international financial system".

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

The leader of Belgium Bart de Wever has presented the EU with a series of "logical, sensible, and warranted conditions" before he will endorse the reconstruction loan scheme, and he has left open the possibility of legal action if it "presents significant risks" for his country.

Explaining the EU's Strategy?

Brussels is racing against time before next Thursday's summit to agree on a arrangement that Belgium can accept.

Until now the EU has avoided using the principal funds directly but since last year has paid the "windfall profits" from them to Ukraine. In 2024 that totaled €3.7bn. Legally, using the revenue is deemed safe as Russia is under sanction and the earnings are not property of the Russian state.

But foreign defense assistance for Ukraine has slipped dramatically in 2025, and Europe has had trouble trying to make up the gap resulting from the US decision to virtually halt funding Ukraine under President Donald Trump.

There are presently two EU plans seeking to furnishing Ukraine with €90bn, to pay for a large portion of its budgetary necessities.

• Option one is to borrow the funds on capital 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 problematic when Budapest and Bratislava are against funding Ukraine's military.
• This makes the other option loaning Ukraine cash from the frozen Russian funds, which were at first held in financial instruments but have now predominantly been converted into cash. That funding is owned by Euroclear located within the European Central Bank.

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

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

Should Euroclear face a financial hit of its own assets in Russia, the shortfall would be covered 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 enforced in the EU.

In a key development, EU ambassadors are poised to endorse on Friday to freeze indefinitely Russia's central bank assets held in Europe indefinitely.

Heretofore they have had to vote all together every six months to continue the freeze, which could have meant a constant 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 "immediate threat to the economic interests of the union" continues.

The Reasons Belgium is Still Not On Board

Brussels is firm it remains a committed partner of Ukraine, but identifies juridical dangers in the plan and worries about being shouldering the fallout if things go wrong.

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

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

Although the EU might be able to secure adequate assurances for the loan itself, Belgium worries about an additional danger of being vulnerable to extra damages or penalties.

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

"Financial institutions need to adhere to capital and liquidity requirements and shouldn't put all their eggs in one basket. Now the EU is telling Euroclear to do exactly that.

"Why do we have these banking laws? It's because we want banks to be solvent. And if things turn sour it would be up to Belgium to save Euroclear. That's another reason why it's so crucial for Belgium to secure water-tight guarantees for Euroclear."

EU Leaders Under Pressure from Every Direction

There is no time to lose, warn seven EU member states including those bordering Russia such as the Baltics, Finland and Poland. They argue the scheme involving immobilized capital is "a economically realistic and politically realistic solution".

"It's a matter of destiny for us," states leading German conservative MP Norbert Röttgen. "If we fail, I don't know what we'll do next. That's why we have to reach an agreement in a week's time".

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

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 talking to Russia about potential collaboration.

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