Russia Retaliates at the EU's Proposal to Loan Frozen Russian Funds to Ukraine

Ukraine is depleting its cash to maintain its armed forces and economy afloat, after nearly four years of the ongoing invasion by Moscow.

For Europe, the remedy to addressing Kyiv's financial shortfall of €135.7bn for the following biennium is found in frozen Russian assets held by Belgian bank Euroclear, and Brussels aim to finalize the plan at their meeting in Brussels next week.

Authorities in Russia state the EU plan would be an illegal seizure, and Moscow's monetary authority declared on Friday it was taking to court Euroclear in a Moscow court prior to a conclusive plan is made.

'Appropriate' to Use Russia's Funds, Assert European and Ukrainian Officials

Overall, Russia has roughly €210bn of its assets frozen in the EU, and €185bn of that is in the custody of Euroclear.

European and Ukrainian authorities argue that that capital should be used to restore what Russia has devastated: Brussels refers to it as a "reconstruction loan" and has come up with a plan to bolster Ukraine's economy valued at €90bn.

"It is appropriate that Moscow's blocked funds should be used to rebuild what Russia has devastated – and that those funds then becomes Ukraine's," says Ukraine's Volodymyr Zelensky.

Germany's leader Friedrich Merz states the assets will "help Ukraine to shield itself efficiently against future Russian attacks".

The legal move by Moscow was expected in Brussels. But it is not only Moscow that is unhappy.

The Belgian government is concerned it will be saddled with an massive bill if it all goes wrong, and Euroclear CEO Valérie Urbain warns using the assets could "disrupt the global financial architecture".

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

Belgian Prime Minister Bart de Wever has presented the EU with a series of "rational, reasonable, and justified conditions" before he will accept the reconstruction loan scheme, and he has left open the possibility of legal action if it "poses significant risks" for his country.

Explaining the EU's Plan?

The EU is working to the wire ahead of next Thursday's summit to agree on a arrangement that Belgium can support.

So far the EU has held off accessing the principal funds directly but for the past year has directed the "excess income" from them to Ukraine. In 2024 that was €3.7bn. Juridically, using the interest is seen as safe as Russia is subject to sanctions and the proceeds are not property of the Russian state.

But foreign defense assistance for Ukraine has fallen significantly in 2025, and Europe has found it difficult to cover the shortfall caused by the US decision to largely cease funding Ukraine under President Donald Trump.

There are currently two EU options aimed at furnishing Ukraine with €90bn, to cover two-thirds of its financial requirements.

• One is to secure the capital on financial markets, guaranteed by the EU budget as a collateral. This is Belgium's preferred option but it requires a agreement by all by EU leaders and that would be challenging when Budapest and Bratislava are against funding Ukraine's military.
• This makes the other option loaning Ukraine cash from the Moscow's immobilized capital, which were at first held in bonds but have now largely turned into cash. That money is owned by Euroclear deposited at the European Central Bank.

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

The plan 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.

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.

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

The EU ambassadors are planning to use an special provision under Article 122 of the EU Treaties so the assets remain frozen as long as an "clear risk to the economic interests of the union" continues.

The Reasons Belgium is Not Yet Convinced

The Belgian government is firm it remains a committed partner of Ukraine, but identifies regulatory pitfalls in the plan and is concerned about being shouldering the consequences if things fail.

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

"The Belgian economy is not large. Belgian GDP is around €565bn – consider if it would need to bear a €185bn bill," notes Veerle Colaert, expert in financial law at KU Leuven University.

While the EU might be able to obtain adequate assurances for the loan itself, Belgium fears an additional danger of being exposed to extra damages or penalties.

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

"Financial institutions need to follow capital and liquidity requirements and shouldn't concentrate risk. Now the EU is instructing Euroclear to do exactly that.

"Why do we have these financial regulations? It's because we want banks to be stable. And if things go wrong it would be up to Belgium to bail out Euroclear. That's another 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 seven EU member states including those bordering Russia such as the Baltics, Finland and Poland. They believe the proposal to use Russian funds is "the financially feasible and politically realistic solution".

"It's a matter of destiny for us," warns 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".

Although Russia is insistent its money should not be used, there are further worries among European figures that the US may want to deploy Russia's blocked funds in another way, as part of its own peace initiative.

Zelensky has said Ukraine is coordinating with Europe and the US on a recovery fund, but he is also mindful the US has been holding discussions with Russia about future co-operation.

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