Russia Retaliates at the EU's Proposal to Lend Immobilized Moscow's Assets to Kyiv

Kyiv remains running out of financial resources to keep going its military and economy afloat, after almost four years of full-scale conflict with Russia.

In the view of European leaders, the solution to filling Ukraine's budget hole of €135.7bn for the next two years lies in assets belonging to Russia that are frozen held by Belgian bank Euroclear, and EU leaders aim to sign that off at their EU leaders' conference next week.

Russian officials warn the EU plan would be an illegal seizure, and Moscow's monetary authority stated on Friday it was taking to court Euroclear in a Moscow court prior to a conclusive plan is made.

'Appropriate' to Employ Russia's Funds, Assert Kyiv and Brussels

All told, Russia has about €210bn of its state reserves immobilized in the EU, and €185bn of that is in the custody of Euroclear.

European and Ukrainian authorities argue that those funds should be used to restore what Russia has devastated: Brussels terms it a "loan for reparations" and has devised a plan to bolster Ukraine's economy to the tune of €90bn.

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

Chancellor Friedrich Merz says the assets will "allow Ukraine to protect itself successfully against subsequent Russian attacks".

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

Authorities in Brussels is concerned it will be left with an enormous bill if it all goes wrong, and Euroclear chief executive Valérie Urbain warns using the assets could "undermine the global financial architecture".

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

Belgium's PM Bart de Wever has presented the EU with a series of "logical, sensible, and warranted conditions" before he will agree to the reconstruction loan scheme, and he has refused to rule out legal action if it "poses significant risks" for his country.

What is the EU's Strategy?

European Union officials is racing against time before next Thursday's summit to finalize a arrangement that Belgium can accept.

So far the EU has avoided accessing the assets themselves directly but starting in 2024 has transferred the "extraordinary revenues" from them to Ukraine. In 2024 that amounted to €3.7bn. Juridically, using the interest is considered safe as Russia is subject to sanctions and the proceeds are not Russian sovereign property.

But international military aid for Ukraine has declined sharply in 2025, and Europe has had trouble trying to make up the deficit resulting from the US decision to largely cease funding Ukraine under President Donald Trump.

There are presently two EU plans seeking to providing Ukraine with €90bn, to pay for two-thirds of its financial requirements.

• Option one is to borrow the funds on capital markets, guaranteed by the EU budget as a surety. This is Belgium's first choice but it requires a unanimous vote by EU leaders and that would be challenging when two member states are against funding Ukraine's military.
• The alternative is loaning Ukraine cash from the Russian assets, which were initially held in financial instruments but have now mostly been converted into cash. That funding is an asset of Euroclear held in the European Central Bank.

The European Commission recognizes Belgium has justified fears and states it is confident it has addressed them.

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

Should 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.

If Russia went after Belgium itself, any judgment by a Russian court would not be accepted in the EU.

In a significant move, EU ambassadors are expected to agree on Friday to freeze indefinitely Russia's central bank assets held in Europe for the foreseeable future.

Until now they have had to vote unanimously every six months to extend 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 continue to be immobilized as long as an "direct danger to the economic interests of the union" continues.

The Reasons Belgium is Still Not On Board

The Belgian government is adamant it remains a strong supporter of Ukraine, but perceives juridical dangers in the plan and is concerned about being shouldering the consequences if things go wrong.

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

"Belgium is a small economy. Belgian GDP is about €565bn – think about if it would need to bear a €185bn bill," comments Veerle Colaert, academic specializing in financial regulation at KU Leuven University.

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

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

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

"What is the purpose of these banking laws? It's because we want banks to be secure. And if things fail it would be up to Belgium to rescue Euroclear. That's a further cause why it's so important for Belgium to get ironclad protections for Euroclear."

The European Union Facing Strain from Multiple Fronts

Time is of the essence, caution seven EU member states including those bordering Russia such as the Baltics, Finland and Poland. They maintain the frozen assets plan is "the fiscally viable and practically possible solution".

"It's a matter of destiny for us," states 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 finalize the deal in a week's time".

While Russia is insistent its money should not be used, there are additional apprehensions among leaders in Europe that the US may want to employ Russia's immobilized billions differently, as part of its own peace plan.

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

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