Moscow Responds at Europe's Scheme to Lend Frozen Russian Funds to Kyiv

Ukraine is facing a severe shortage of financial resources to keep going its armed forces and economy afloat, after close to 48 months of Russia's full-scale war.

From the EU's perspective, the solution to plugging Ukraine's funding gap of €135.7bn for the following biennium rests with Moscow's immobilized funds sitting in Belgian bank Euroclear, and Brussels hope to give it the green light at their EU leaders' conference next week.

Russian officials warn the EU plan would be an confiscation, and Moscow's monetary authority declared on Friday it was taking to court Euroclear in a Moscow court ahead of a final decision is made.

'Just' to Use Moscow's Funds, Assert European and Ukrainian Officials

Overall, Russia has roughly €210bn of its state reserves immobilized in the EU, and €185bn of that is managed by Euroclear.

Brussels and Kyiv argue that those funds should be used to rebuild what Russia has destroyed: The European Commission refers to it as a "reparations loan" and has devised a plan to support Ukraine's economy to the tune of €90bn.

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

German Chancellor Friedrich Merz argues the assets will "enable Ukraine to defend itself successfully against subsequent Russian attacks".

Russia's court action was expected in Brussels. But it is not just Moscow that is concerned.

Authorities in Brussels is anxious it will be burdened by an huge bill if it all backfires, and Euroclear head Valérie Urbain says using the assets could "disrupt the international financial system".

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

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

The Details of the EU's Proposal?

Brussels is under pressure before next Thursday's summit to finalize a solution that Belgium can support.

So far the EU has held off using the assets themselves directly but starting in 2024 has paid the "windfall profits" from them to Ukraine. In 2024 that amounted to €3.7bn. Legally, using the interest is deemed less risky as Russia is under sanction and the proceeds are not Russian sovereign property.

But global military support for Ukraine has slipped dramatically in 2025, and Europe has struggled to compensate for the gap left by the US decision to largely cease funding Ukraine under President Donald Trump.

There are presently two EU proposals designed to supplying Ukraine with €90bn, to cover two-thirds of its budgetary necessities.

• Option one is to secure the capital on capital markets, guaranteed by the EU budget as a collateral. This is Belgium's favored solution but it needs a consensus by EU leaders and that would be problematic when two member states oppose funding Ukraine's military.
• This makes the other option loaning Ukraine cash from the Russian assets, which were originally held in securities but have now predominantly turned into cash. That money is an asset of Euroclear deposited at the European Central Bank.

Brussels' executive arm recognizes Belgium has justified fears and states it is assured it has dealt with them.

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

If Euroclear face a financial hit of its own assets in Russia, that would be offset from assets belonging to Russia's own settlement agency which are in the EU.

Should Russia took legal action against Belgium itself, any judgment by a Russian court would not be accepted in the EU.

In a key development, EU ambassadors are set to approve 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 repeated risk to Belgium.

The EU ambassadors are set to use an special provision under Article 122 of the EU Treaties so the assets continue to be immobilized as long as an "clear risk to the financial well-being of the union" continues.

Why Belgium is Not Yet On Board

Belgium is firm it remains a staunch ally of Ukraine, but sees legal risks in the plan and fears being shouldering the repercussions if things fail.

A usually partisan political environment in this case has united behind Prime Minister Bart de Wever, who is under pressure from European colleagues.

"The Belgian economy is not large. Belgian GDP is approximately €565bn – consider if it would need to carry a €185bn bill," comments Veerle Colaert, professor of financial law at KU Leuven University.

Although the EU might be able to secure adequate protections for the loan itself, Belgium is concerned about an added risk of being exposed to extra fines or liabilities.

Prof Colaert also argues the demand for Euroclear to provide a loan to the EU would breach EU banking regulations.

"Lenders need to comply with prudential rules and shouldn't put all their eggs in one basket. 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 fall to Belgium to rescue Euroclear. That's an additional reason why it's so vital for Belgium to secure absolute assurances for Euroclear."

The European Union In a Difficult Position from Multiple Fronts

Time is of the essence, caution several EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They believe the frozen assets plan is "the financially feasible and politically realistic solution".

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

While Russia is adamant its money should not be touched, there are further worries among European figures that the US may want to use Russia's blocked funds in another way, as part of its own diplomatic proposal.

Zelensky has said Ukraine is working with Europe and the US on a reconstruction fund, but he is also mindful the US has been talking to Russia about potential collaboration.

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