Moscow Hits Back at Europe's Proposal to Lend Immobilized Russian Funds to Kyiv

Ukraine is running out of funding to maintain its armed forces and economy, after almost four years of full-scale conflict with Russia.

For Europe, the answer to plugging Kyiv's financial shortfall of €135.7bn for the next two years lies in frozen Russian assets located within Belgian bank Euroclear, and Brussels hope to sign that off at their meeting in Brussels next week.

Moscow's representatives warn the EU plan would be an confiscation, and the Central Bank of Russia declared on Friday it was initiating legal action against Euroclear in a Moscow court even before a conclusive plan is made.

'Just' to Employ Russia's Funds, Argue Ukraine and the EU

Overall, Russia has approximately €210bn of its state reserves frozen 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 destroyed: Brussels calls it a "loan for reparations" and has devised a plan to bolster Ukraine's economy to the tune of €90bn.

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

Germany's leader Friedrich Merz says the assets will "enable Ukraine to shield itself effectively against subsequent Russian attacks".

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

Authorities in Brussels is worried it will be saddled with an massive bill if it all goes wrong, and Euroclear CEO Valérie Urbain warns using the assets could "destabilise the world's financial order".

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

Belgian Prime Minister Bart de Wever has set the EU a series of "logical, sensible, and warranted conditions" before he will accept the reconstruction loan scheme, and he has not excluded legal action if it "presents significant risks" for his country.

The Details of the EU's Strategy?

European Union officials is racing against time prior to next Thursday's summit to come up with a compromise that Belgium can agree to.

So far the EU has avoided touching 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 profits is deemed safe as Russia is under sanction and the returns are not Russian sovereign property.

But international military aid for Ukraine has slipped dramatically in 2025, and Europe has found it difficult to make up the gap left by the US decision to virtually halt funding Ukraine under President Donald Trump.

There are at the moment two EU proposals aimed at providing Ukraine with €90bn, to pay for a majority of its financial requirements.

• One is to raise the money on financial markets, guaranteed by the EU budget as a collateral. This is Belgium's first choice but it needs a agreement by all by EU leaders and that would be difficult when Budapest and Bratislava oppose funding Ukraine's military.
• That leaves lending Ukraine cash from the Moscow's immobilized capital, which were initially held in financial instruments but have now largely matured into cash. That capital is Euroclear property held in the European Central Bank.

The European Commission accepts Belgium has valid worries and says it is convinced it has resolved them.

The proposal is for Belgium to be safeguarded with a insurance applying to all the €210bn of Russian assets in the EU.

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

If Russia took legal action against Belgium itself, any decision by a Russian court would not be enforced in the EU.

In a key development, EU ambassadors are expected to agree on Friday to permanently block Russia's central bank assets held in Europe permanently.

Heretofore 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 set to use an extraordinary measure under Article 122 of the EU Treaties so the assets stay blocked as long as an "immediate threat to the financial well-being of the union" continues.

Why Belgium is Still Not Convinced

Brussels is insistent it remains a strong supporter of Ukraine, but perceives regulatory pitfalls in the plan and worries about being forced to deal with the repercussions if things do not work out.

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

"Belgium has a modest-sized economy. Belgian GDP is about €565bn – consider if it would need to carry a €185bn bill," comments Veerle Colaert, expert in financial law at KU Leuven University.

While the EU might be able to secure sufficient assurances for the loan itself, Belgium is concerned about an additional danger of being vulnerable to extra damages or penalties.

Prof Colaert also argues the stipulation for Euroclear to issue credit to the EU would breach EU banking regulations.

"Banks need to adhere to stability regulations and shouldn't put all their eggs in one basket. 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 solvent. And if things turn sour it would be up to Belgium to rescue Euroclear. That's an additional reason why it's so vital for Belgium to get water-tight guarantees for Euroclear."

Europe Under Pressure from Multiple Fronts

The situation is urgent, state several EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They believe the frozen assets plan is "a financially feasible and politically achievable solution".

"This is a crucial test for us," warns 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".

Although Russia is unyielding its money should not be accessed, there are added concerns among European figures that the US may want to use Russia's immobilized billions for another purpose, as part of its own peace initiative.

Zelensky has said Ukraine is in discussions 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 mentioned $100bn of Russia's frozen assets being used by the US for reconstruction, with the US {taking|receiving