Russia Retaliates at the EU's Proposal to Loan Immobilized Moscow's Funds to Ukraine

Ukraine is facing a severe shortage of financial resources to sustain its armed forces and economy afloat, after nearly four years of full-scale conflict with Russia.

In the view of European leaders, the solution to addressing Ukraine's funding gap of €135.7bn for the coming 24 months is found in frozen Russian assets located within Belgian bank Euroclear, and Brussels seek to finalize the plan at their meeting in Brussels next week.

Russian officials caution the EU plan would be an confiscation, and Moscow's monetary authority announced on Friday it was initiating legal action against Euroclear in a Moscow court even before a final decision is made.

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

In total, Russia has approximately €210bn of its state reserves immobilized in the EU, and €185bn of that is held by Euroclear.

European and Ukrainian authorities contend that that capital should be used to rebuild what Russia has destroyed: Brussels terms it a "reconstruction loan" and has proposed a plan to prop up Ukraine's economy valued at €90bn.

"It is only just that Moscow's blocked funds should be used to reconstruct what Russia has devastated – and that those funds then becomes Ukraine's," remarks Ukraine's Volodymyr Zelensky.

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

Russia's court action was anticipated in Brussels. But it is not only Moscow that is dissatisfied.

Belgium is worried it will be saddled with an massive bill if it all backfires, and Euroclear chief executive Valérie Urbain says using the assets could "destabilise the global financial architecture".

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

Belgium's PM Bart de Wever has set the EU a series of "rational, reasonable, and justified conditions" before he will endorse 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 Proposal?

European Union officials is under pressure ahead of next Thursday's summit to agree on a solution that Belgium can accept.

So far the EU has held off using the principal funds directly but starting in 2024 has directed the "extraordinary revenues" from them to Ukraine. In 2024 that totaled €3.7bn. Legally, using the revenue is seen as safe as Russia is subject to sanctions and the proceeds are not Russian sovereign property.

But foreign defense assistance for Ukraine has slipped dramatically in 2025, and Europe has had trouble trying to compensate for the shortfall resulting from the US decision to largely cease funding Ukraine under President Donald Trump.

There are presently two EU plans designed to furnishing Ukraine with €90bn, to cover a large portion of its budgetary necessities.

• One is to raise the money on financial markets, guaranteed by the EU budget as a guarantee. This is Belgium's preferred option but it needs a consensus by EU leaders and that would be problematic when two member states oppose funding Ukraine's military.
• The alternative is providing a loan of Ukraine cash from the Russian assets, which were at first held in financial instruments but have now mostly matured into cash. That capital is an asset of Euroclear located within the European Central Bank.

The EU's executive recognizes Belgium has legitimate concerns and says it is convinced it has resolved them.

The scheme is for Belgium to be shielded with a assurance covering 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.

Should Russia went after Belgium itself, any ruling by a Russian court would not be recognized in the EU.

As an important step, EU ambassadors are set to approve on Friday to immobilise Russia's central bank assets held in Europe for the foreseeable future.

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

The EU ambassadors are expected to use an emergency clause under Article 122 of the EU Treaties so the assets stay blocked as long as an "clear risk to the economic interests of the union" continues.

Why Belgium is Still Not On Board

Brussels is insistent it remains a committed partner of Ukraine, but sees regulatory pitfalls in the plan and fears being shouldering the consequences if things go wrong.

A typically fractured political scene in this case has come together in support of Prime Minister Bart de Wever, who is under pressure from other European officials.

"Belgium is a small economy. Belgian GDP is around €565bn – consider if it would need to bear a €185bn bill," comments Veerle Colaert, professor of financial law at KU Leuven University.

Although the EU might be able to secure sufficient guarantees for the loan itself, Belgium is concerned about an additional danger of being subject to extra fines or liabilities.

Prof Colaert also believes the demand for Euroclear to issue credit to the EU would contravene EU banking regulations.

"Financial institutions need to comply with stability regulations and shouldn't make one enormous loan. Now the EU is telling Euroclear to do precisely that.

"Why do we have these financial regulations? It's because we want banks to be stable. And if things go wrong it would fall to Belgium to rescue Euroclear. That's an additional reason why it's so vital for Belgium to get absolute assurances for Euroclear."

EU Leaders In a Difficult Position from All Sides

Time is of the essence, caution a group of EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They argue the frozen assets plan is "the most financially feasible and politically realistic solution".

"It's a matter of destiny for us," warns leading German conservative MP Norbert Röttgen. "If we fail, I don't know what we'll do subsequently. That's why we have to reach an agreement in a week's time".

Although Russia is unyielding its money should not be touched, there are further worries among EU officials that the US may want to employ Russia's blocked funds in another way, as part of its own peace initiative.

Zelensky has indicated Ukraine is coordinating with Europe and the US on a rebuilding fund, but he is also mindful the US has been engaging with Russia about future co-operation.

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