Russia Retaliates at Europe's Scheme to Loan Immobilized Moscow's Funds to Ukraine

Kyiv remains running out of funding to sustain its armed forces and economy, after close to 48 months of Russia's full-scale war.

From the EU's perspective, the solution to addressing Ukraine's financial shortfall of €135.7bn for the coming 24 months rests with frozen Russian assets located within Belgian bank Euroclear, and Brussels aim to sign that off at their meeting in Brussels next week.

Authorities in Russia caution the EU plan would be an confiscation, and the Central Bank of Russia declared on Friday it was suing Euroclear in a Moscow court even before a conclusive plan is made.

'Just' to Employ Russia's Assets, Assert Kyiv and Brussels

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

Brussels and Kyiv argue that money should be used to rebuild what Russia has devastated: The European Commission calls it a "loan for reparations" and has proposed a plan to prop up Ukraine's economy to the tune of €90bn.

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

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

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

Belgium is anxious it will be burdened by an huge bill if it all fails, and Euroclear CEO Valérie Urbain says using the assets could "destabilise the world's financial order".

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 "pragmatic, fair, and legitimate conditions" before he will endorse the reparations plan, and he has not excluded legal action if it "poses significant risks" for his country.

The Details of the EU's Proposal?

European Union officials is under pressure before next Thursday's summit to agree on a compromise that Belgium can agree to.

Previously the EU has avoided using the frozen capital directly but since last year has transferred the "windfall profits" from them to Ukraine. In 2024 that amounted to €3.7bn. From a legal standpoint, using the revenue is deemed permissible as Russia is subject to sanctions and the proceeds are not Moscow's sovereign assets.

But global military support for Ukraine has fallen significantly in 2025, and Europe has had trouble trying to cover the deficit 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 finance two-thirds of its financial requirements.

• The first is to borrow the funds on financial markets, guaranteed by the EU budget as a collateral. This is Belgium's preferred option but it requires a unanimous vote by EU leaders and that would be problematic when Hungary and Slovakia oppose funding Ukraine's military.
• This makes the other option loaning Ukraine cash from the frozen Russian funds, which were initially held in financial instruments but have now mostly been converted into cash. That capital is an asset of Euroclear located within the European Central Bank.

Brussels' executive arm recognizes Belgium has valid worries and claims it is assured it has dealt with them.

The proposal is for Belgium to be protected with a insurance encompassing 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 clearing house which are in the EU.

Should Russia targeted 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 immobilise Russia's central bank assets held in Europe indefinitely.

Heretofore they have had to vote unanimously every six months to renew the freeze, which could have meant a repeated risk to Belgium.

The EU ambassadors are expected to use an special provision under Article 122 of the EU Treaties so the assets stay blocked as long as an "immediate threat to the economic interests of the union" continues.

Why Belgium is Still Not On Board

Belgium is adamant it remains a committed partner of Ukraine, but sees regulatory pitfalls in the plan and worries about being left to handle the fallout if things fail.

A typically divided political landscape in this case has rallied behind Prime Minister Bart de Wever, who is facing pressure from European colleagues.

"Belgium is a small economy. Belgian GDP is around €565bn – imagine if it would need to shoulder 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 worries about an additional danger of being subject to extra fines or liabilities.

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

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

"What is the purpose of these bank rules? It's because we want banks to be solvent. And if things go wrong it would become the responsibility of Belgium to rescue Euroclear. That's an additional reason why it's so important for Belgium to get absolute protections for Euroclear."

The European Union Under Pressure from Every Direction

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 scheme involving immobilized capital is "the financially feasible and politically realistic solution".

"This is a crucial test 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 reach an agreement in a week's time".

While Russia is insistent its money should not be used, there are added concerns among leaders in Europe that the US may want to employ Russia's immobilized billions in another way, as part of its own peace initiative.

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

A preliminary version of the US peace plan referred to $100bn of Russia's immobilized capital being used by the US for reconstruction, with the US {taking|receiving