Russia Retaliates at Europe's Scheme to Lend Frozen Moscow's Assets to Ukraine

Kyiv remains depleting its financial resources to sustain its armed forces and economy, after nearly four years of Russia's full-scale war.

In the view of European leaders, the answer to filling Ukraine's budget hole of €135.7bn for the coming 24 months is found in Moscow's immobilized funds sitting in Belgian bank Euroclear, and European Union officials aim to sign that off at their Brussels summit next week.

Authorities in Russia caution the EU plan would be an confiscation, and Moscow's monetary authority declared on Friday it was suing Euroclear in a Moscow court ahead of a conclusive plan is made.

'Just' to Use Moscow's Funds, Argue Ukraine and the EU

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

European and Ukrainian authorities contend that those funds should be used to rebuild what Russia has devastated: EU officials refers to it as a "reconstruction loan" and has proposed a plan to prop up Ukraine's economy amounting to €90bn.

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

German Chancellor Friedrich Merz states the assets will "enable Ukraine to defend itself efficiently against subsequent Russian attacks".

Moscow's lawsuit was expected in Brussels. But it is not just Moscow that is unhappy.

Authorities in Brussels is worried it will be left with an huge bill if it all backfires, and Euroclear head Valérie Urbain says using the assets could "disrupt the world's financial order".

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

Belgium's PM Bart de Wever has set the EU a series of "pragmatic, fair, and legitimate conditions" before he will agree to the reconstruction loan scheme, and he has refused to rule out legal action if it "carries significant risks" for his country.

What is the EU's Proposal?

The EU is working to the wire prior to next Thursday's summit to come up with a solution that Belgium can agree to.

Until now the EU has refrained from using the frozen capital directly but starting in 2024 has directed the "extraordinary revenues" from them to Ukraine. In 2024 that totaled €3.7bn. From a legal standpoint, using the revenue is seen as permissible as Russia is under sanction and the earnings are not Moscow's sovereign assets.

But international military aid for Ukraine has fallen significantly in 2025, and Europe has found it difficult to cover the shortfall caused by the US decision to all but stop funding Ukraine under President Donald Trump.

There are presently two EU options designed to furnishing Ukraine with €90bn, to cover a large portion of its funding needs.

• The first is to borrow the funds on financial markets, guaranteed by the EU budget as a guarantee. This is Belgium's first choice but it needs a agreement by all by EU leaders and that would be difficult when two member states oppose funding Ukraine's military.
• The alternative is lending Ukraine cash from the frozen Russian funds, which were at first held in bonds but have now predominantly matured into cash. That money is Euroclear property located within the European Central Bank.

The European Commission accepts Belgium has justified fears and claims it is convinced it has dealt with them.

The proposal is for Belgium to be shielded with a assurance covering all the €210bn of Russian assets in the EU.

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

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

In a significant move, EU ambassadors are expected to agree on Friday to immobilise Russia's central bank assets held in Europe permanently.

Until now they have had to vote all together every six months to renew the freeze, which could have meant a repeated risk to Belgium.

The EU ambassadors are expected to use an extraordinary measure under Article 122 of the EU Treaties so the assets continue to be immobilized as long as an "direct danger to the financial well-being of the union" continues.

Why Belgium is Not Yet Convinced

The Belgian government is firm it remains a staunch ally of Ukraine, but perceives legal risks in the plan and is concerned about being forced to deal with the consequences if things fail.

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

"Belgium has a modest-sized economy. Belgian GDP is around €565bn – think about if it would need to shoulder a €185bn bill," notes Veerle Colaert, academic specializing in financial regulation at KU Leuven University.

Although the EU might be able to secure enough protections for the loan itself, Belgium fears an further exposure of being vulnerable to extra fines or liabilities.

Prof Colaert also contends the stipulation for Euroclear to issue credit to the EU would violate EU banking regulations.

"Financial institutions need to comply with capital and liquidity requirements and shouldn't concentrate risk. 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 secure. And if things go wrong it would be up to Belgium to rescue Euroclear. That's another reason why it's so vital for Belgium to get absolute assurances for Euroclear."

EU Leaders In a Difficult Position from Multiple Fronts

The situation is urgent, caution seven EU member states including those bordering Russia such as the Baltics, Finland and Poland. They argue the scheme involving immobilized capital is "a fiscally viable and politically achievable solution".

"This is a crucial test for us," states leading German conservative MP Norbert Röttgen. "If we fail, 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 added concerns among leaders in Europe that the US may want to deploy Russia's immobilized billions in another way, as part of its own peace initiative.

Zelensky has said Ukraine is working with Europe and the US on a reconstruction fund, but he is also cognizant the US has been engaging with Russia about potential collaboration.

A preliminary version of the US peace plan suggested $100bn of Russia's blocked funds being used by the US for reconstruction, with the US {taking|receiving