Moscow Hits Back at the EU's Proposal to Loan Immobilized Russian Funds to Ukraine

Ukraine is running out of financial resources to maintain its armed forces and economy, after nearly four years of the ongoing invasion by Moscow.

For Europe, the remedy to addressing Ukraine's financial shortfall of €135.7bn for the coming 24 months is found in frozen Russian assets held by Belgian bank Euroclear, and Brussels seek to finalize the plan at their EU leaders' conference next week.

Moscow's representatives warn the EU plan would be an illegal seizure, and Moscow's monetary authority stated on Friday it was initiating legal action against Euroclear in a Moscow court ahead of a conclusive plan is made.

'Appropriate' to Employ Russia's Funds, Assert Ukraine and the EU

All told, 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 money should be used to restore what Russia has destroyed: EU officials refers to it as a "reconstruction loan" and has come up with a plan to prop up Ukraine's economy valued at €90bn.

"It's only fair that Russia's frozen assets should be used to reconstruct what Russia has destroyed – and that that capital then becomes Ukraine's," states Ukrainian President Volodymyr Zelensky.

Chancellor Friedrich Merz says the assets will "help Ukraine to shield itself efficiently against any future Russian attacks".

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

Belgium is anxious it will be burdened by an massive bill if it all fails, and Euroclear head Valérie Urbain warns using the assets could "destabilise the global financial architecture".

Euroclear also has an approximate €16-17bn frozen 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 accept the reconstruction loan scheme, and he has refused to rule out legal action if it "carries significant risks" for his country.

The Details of the EU's Strategy?

European Union officials is working to the wire before next Thursday's summit to come up with a solution that Belgium can support.

So far the EU has refrained from using the frozen capital directly but for the past year has transferred the "windfall profits" from them to Ukraine. In 2024 that was €3.7bn. Juridically, using the interest is seen as safe as Russia is under sanction and the returns are not property of the Russian state.

But international military aid for Ukraine has declined sharply in 2025, and Europe has had trouble trying to make up the gap left by the US decision to all but stop funding Ukraine under President Donald Trump.

There are presently two EU proposals seeking to supplying Ukraine with €90bn, to pay for a large portion of its funding needs.

• One is to borrow the funds on the markets, secured against the EU budget as a collateral. This is Belgium's favored solution but it demands a consensus by EU leaders and that would be difficult when Budapest and Bratislava object to 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 funding is an asset of Euroclear 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 scheme is for Belgium to be shielded with a guarantee encompassing all the €210bn of Russian assets in the EU.

If Euroclear incur losses 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 took legal action against Belgium itself, any judgment by a Russian court would not be enforced in the EU.

In a key development, EU ambassadors are set to approve 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 extend the freeze, which could have meant a repeated risk to Belgium.

The EU ambassadors are set to use an extraordinary measure under Article 122 of the EU Treaties so the assets remain frozen as long as an "immediate threat to the economic interests of the union" continues.

The Reasons Belgium is Still Not Satisfied

Belgium is adamant it remains a staunch ally of Ukraine, but identifies juridical dangers in the plan and worries about being forced to deal with the repercussions if things fail.

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

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

While the EU might be able to secure sufficient assurances for the loan itself, Belgium is concerned about an further exposure of being subject to extra damages or penalties.

Prof Colaert also contends the stipulation for Euroclear to issue credit to the EU would violate EU banking regulations.

"Financial institutions need to comply with prudential rules and shouldn't concentrate risk. Now the EU is asking Euroclear to do exactly that.

"Why do we have these bank rules? It's because we want banks to be solvent. And if things fail it would become the responsibility of Belgium to rescue Euroclear. That's an additional reason why it's so crucial for Belgium to get ironclad protections for Euroclear."

EU Leaders In a Difficult Position from All Sides

The situation is urgent, caution a group of EU member states including those closest to Russia such as the Baltics, Finland and Poland. They believe the proposal to use Russian funds is "a economically realistic and politically achievable solution".

"It's a matter of destiny for us," warns leading German conservative MP Norbert Röttgen. "If we fail, I don't know what we'll do next. 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 further worries among European figures that the US may want to employ Russia's blocked funds for another purpose, as part of its own peace plan.

Zelensky has stated Ukraine is coordinating with Europe and the US on a reconstruction fund, but he is also mindful the US has been talking to Russia about future co-operation.

An initial document 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