Russia Hits Back at the EU's Proposal to Loan Frozen Moscow's Cash to Ukraine

Ukraine is facing a severe shortage of financial resources to maintain its armed forces and economy, after close to 48 months of full-scale conflict with Russia.

For Europe, the remedy to filling Ukraine's financial shortfall of €135.7bn for the coming 24 months is found in assets belonging to Russia that are frozen held by Belgian bank Euroclear, and Brussels aim to give it the green light at their Brussels summit next week.

Authorities in Russia state the EU plan would be an confiscation, and Moscow's monetary authority declared on Friday it was initiating legal action against Euroclear in a Moscow court ahead of a final decision is made.

'Appropriate' to Employ Moscow's Assets, Say Kyiv and Brussels

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

The EU and Ukraine argue that money should be used to reconstruct what Russia has devastated: Brussels calls it a "reparations loan" and has come up with a plan to prop up Ukraine's economy to the tune of €90bn.

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

Chancellor Friedrich Merz argues the assets will "help Ukraine to defend itself efficiently against any future Russian attacks".

The legal move by Moscow was expected in Brussels. But it is not just Moscow that is dissatisfied.

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

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

The leader of Belgium Bart de Wever has given Brussels a series of "rational, reasonable, and justified conditions" before he will endorse the reparations plan, and he has left open the possibility of legal action if it "poses significant risks" for his country.

The Details of the EU's Plan?

European Union officials is under pressure before next Thursday's summit to finalize a solution that Belgium can accept.

Until now the EU has held off touching the principal funds directly but for the past year has transferred the "windfall profits" from them to Ukraine. In 2024 that amounted to €3.7bn. Juridically, using the revenue is considered safe as Russia is subject to sanctions and the earnings are not property of the Russian state.

But foreign defense assistance for Ukraine has declined sharply in 2025, and Europe has found it difficult to cover the gap resulting from the US decision to largely cease funding Ukraine under President Donald Trump.

There are currently two EU plans aimed at supplying Ukraine with €90bn, to pay for a large portion of its budgetary necessities.

• Option one is to secure the capital on financial markets, guaranteed by the EU budget as a collateral. This is Belgium's favored solution but it requires a unanimous vote by EU leaders and that would be difficult when two member states object to funding Ukraine's military.
• That leaves lending Ukraine cash from the frozen Russian funds, which were at first held in bonds but have now predominantly been converted into cash. That money is owned by Euroclear held in the European Central Bank.

The EU's executive acknowledges Belgium has valid worries and states it is convinced it has addressed them.

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

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

In a significant move, EU ambassadors are poised to endorse on Friday to permanently block Russia's central bank assets held in Europe for the foreseeable future.

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

The EU ambassadors are set to use an special provision under Article 122 of the EU Treaties so the assets remain frozen as long as an "direct danger to the economic security of the union" continues.

The Reasons Belgium is Remains Satisfied

Belgium is insistent it remains a strong supporter of Ukraine, but identifies regulatory pitfalls in the plan and fears being left to handle the consequences if things fail.

A usually divided political landscape in this case has come together in support of Prime Minister Bart de Wever, who is being pressured from fellow EU leaders.

"The Belgian economy is not large. Belgian GDP is around €565bn – imagine if it would need to bear a €185bn bill," says Veerle Colaert, academic specializing in financial regulation at KU Leuven University.

While the EU might be able to arrange enough protections for the loan itself, Belgium fears an further exposure of being vulnerable to extra damages or penalties.

Prof Colaert also contends the requirement for Euroclear to issue credit to the EU would contravene EU banking regulations.

"Financial institutions need to adhere to prudential rules and shouldn't make one enormous loan. Now the EU is telling Euroclear to do precisely that.

"Why do we have these banking laws? It's because we want banks to be solvent. And if things fail it would fall to Belgium to bail out Euroclear. That's a further cause why it's so crucial for Belgium to get ironclad guarantees for Euroclear."

The European Union Facing Strain from Every Direction

There is no time to lose, warn a group of EU member states including those closest to Russia such as the Baltics, Finland and Poland. They believe the proposal to use Russian funds is "the most economically realistic and practically possible solution".

"It is a decisive moment for us," says leading German conservative MP Norbert Röttgen. "Should we not succeed, 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 accessed, there are additional apprehensions among EU officials that the US may want to deploy Russia's blocked funds differently, as part of its own diplomatic proposal.

Zelensky has stated Ukraine is working with Europe and the US on a recovery fund, but he is also aware the US has been talking to Russia about possible partnership.

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