Moscow Retaliates at the EU's Plan to Loan Frozen Russian Funds to Kyiv

Kyiv remains running out of cash to keep going its military and economy afloat, after almost four years of Russia's full-scale war.

In the view of European leaders, the remedy to filling Kyiv's funding gap of €135.7bn for the next two years rests with frozen Russian assets held by Belgian bank Euroclear, and Brussels hope to give it the green light at their meeting in Brussels next week.

Russian officials state the EU plan would be an illegal seizure, and the Central Bank of Russia stated on Friday it was taking to court Euroclear in a Moscow court ahead of a final decision is made.

'Only Fair' to Utilize Russia's Funds, Argue Ukraine and the EU

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

Brussels and Kyiv argue that that capital should be used to restore what Russia has devastated: The European Commission refers to it as a "reparations loan" and has devised a plan to bolster Ukraine's economy amounting to €90bn.

"It is appropriate that Russia's frozen assets should be used to reconstruct what Russia has devastated – and that money then becomes ours," states Ukraine's Volodymyr Zelensky.

Chancellor Friedrich Merz says the assets will "enable 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.

Authorities in Brussels is concerned it will be left with an huge bill if it all goes wrong, and Euroclear head Valérie Urbain warns using the assets could "disrupt the international financial system".

Euroclear also has an roughly €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 agree to the reparations plan, and he has not excluded legal action if it "carries significant risks" for his country.

The Details of the EU's Plan?

Brussels is under pressure before next Thursday's summit to agree on a arrangement that Belgium can agree to.

Until now the EU has refrained from accessing the principal funds directly but for the past year has directed the "excess income" from them to Ukraine. In 2024 that totaled €3.7bn. Legally, using the interest is deemed safe as Russia is subject to sanctions and the earnings are not property of the Russian state.

But foreign defense assistance for Ukraine has slipped dramatically in 2025, and Europe has struggled to make up the gap caused by the US decision to all but stop funding Ukraine under President Donald Trump.

There are presently two EU plans seeking to supplying Ukraine with €90bn, to finance a majority of its financial requirements.

• The first is to borrow the funds on the markets, backed by the EU budget as a surety. This is Belgium's first choice but it needs a agreement by all by EU leaders and that would be challenging when Hungary and Slovakia oppose funding Ukraine's military.
• The alternative is loaning Ukraine cash from the Russian assets, which were originally held in bonds but have now largely matured into cash. That money is an asset of Euroclear deposited at the European Central Bank.

Brussels' executive arm recognizes Belgium has legitimate concerns and states it is confident it has addressed them.

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

If Euroclear incur losses of its own assets in Russia, the loss would be compensated from assets belonging to Russia's own settlement agency which are in the EU.

If Russia targeted Belgium itself, any judgment by a Russian court would not be enforced in the EU.

As an important step, EU ambassadors are set to approve on Friday to freeze indefinitely Russia's central bank assets held in Europe permanently.

Heretofore they have had to vote by consensus every six months to extend the freeze, which could have meant a constant risk to Belgium.

The EU ambassadors are planning 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.

Why Belgium is Remains Satisfied

Brussels is adamant it remains a committed partner of Ukraine, but identifies legal risks in the plan and fears being forced to deal with the repercussions if things go wrong.

A normally partisan political environment in this case has come together in support of Prime Minister Bart de Wever, who is being pressured from other European officials.

"Belgium is a small economy. Belgian GDP is about €565bn – consider 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 obtain adequate guarantees for the loan itself, Belgium fears an added risk of being subject to extra damages or penalties.

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

"Financial institutions need to adhere to capital and liquidity requirements and shouldn't make one enormous loan. Now the EU is instructing Euroclear to do exactly that.

"What is the purpose of these banking laws? It's because we want banks to be stable. And if things go wrong it would become the responsibility of Belgium to save Euroclear. That's another reason why it's so crucial for Belgium to obtain absolute protections for Euroclear."

The European Union Under Pressure from All Sides

The situation is urgent, state a group of EU member states including those bordering Russia such as the Baltics, Finland and Poland. They maintain the scheme involving immobilized capital is "the economically realistic and practically possible solution".

"It is a decisive moment for us," warns leading German conservative MP Norbert Röttgen. "If the plan collapses, I don't know what we'll do afterwards. That's why we have to finalize the deal in a week's time".

While Russia is insistent its money should not be touched, there are further worries among leaders in Europe that the US may want to use Russia's frozen billions in another way, as part of its own diplomatic proposal.

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

An early draft of the US peace plan mentioned $100bn of Russia's immobilized capital being used by the US for reconstruction, with the US {taking|receiving