Russia Retaliates at the EU's Plan to Lend Frozen Moscow's Assets to Kyiv

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

From the EU's perspective, the answer to plugging Ukraine's budget hole of €135.7bn for the coming 24 months rests with frozen Russian assets held by Belgian bank Euroclear, and European Union officials aim to give it the green light at their Brussels summit next week.

Authorities in Russia state the EU plan would be an illegal seizure, and Russia's central bank announced on Friday it was suing Euroclear in a Moscow court prior to a definitive agreement is made.

'Appropriate' to Use Moscow's Funds, Argue European and Ukrainian Officials

Overall, Russia has roughly €210bn of its state reserves blocked in the EU, and €185bn of that is held by Euroclear.

European and Ukrainian authorities argue that that capital should be used to reconstruct what Russia has destroyed: EU officials calls it a "reparations loan" and has come up with a plan to prop up Ukraine's economy valued at €90bn.

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

Germany's leader Friedrich Merz argues the assets will "enable Ukraine to protect itself efficiently against subsequent Russian attacks".

Russia's court action was expected in Brussels. But it is not just Moscow that is unhappy.

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

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

Belgium's PM Bart de Wever has set the EU a series of "logical, sensible, and warranted conditions" before he will accept the reparations plan, and he has not excluded legal action if it "carries significant risks" for his country.

What is the EU's Proposal?

Brussels is working to the wire prior to next Thursday's summit to finalize a solution that Belgium can accept.

Until now the EU has refrained from touching the assets themselves directly but since last year has directed the "extraordinary revenues" from them to Ukraine. In 2024 that totaled €3.7bn. From a legal standpoint, using the revenue is deemed safe as Russia is sanctioned and the returns are not Moscow's sovereign assets.

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

There are at the moment two EU proposals designed to supplying Ukraine with €90bn, to pay for a majority of its funding needs.

• Option one is to raise the money on the markets, secured against the EU budget as a guarantee. This is Belgium's favored solution but it demands a consensus by EU leaders and that would be challenging when two member states oppose funding Ukraine's military.
• The alternative is providing a loan of Ukraine cash from the frozen Russian funds, which were originally held in financial instruments but have now largely turned into cash. That funding is an asset of 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 scheme is for Belgium to be safeguarded with a guarantee covering all the €210bn of Russian assets in the EU.

Should Euroclear suffer a loss of its own assets in Russia, the loss would be compensated from assets belonging to Russia's own settlement agency which are in the EU.

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

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

Until now they have had to vote unanimously 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 stay blocked as long as an "direct danger to the financial well-being of the union" continues.

The Reasons Belgium is Remains Convinced

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

A usually partisan political environment in this case has rallied behind Prime Minister Bart de Wever, who is under pressure from European colleagues.

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

Although the EU might be able to arrange adequate assurances for the loan itself, Belgium worries about an added risk of being exposed to extra damages or penalties.

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

"Financial institutions need to follow prudential rules 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 bank rules? It's because we want banks to be stable. And if things go wrong it would fall to Belgium to bail out Euroclear. That's a further cause why it's so crucial for Belgium to obtain water-tight guarantees for Euroclear."

Europe In a Difficult Position from Multiple Fronts

The situation is urgent, state seven EU member states including those bordering Russia such as the Baltics, Finland and Poland. They argue the scheme involving immobilized capital is "the financially feasible and practically possible solution".

"This is a crucial test for us," states leading German conservative MP Norbert Röttgen. "Should we not succeed, I don't know what we'll do afterwards. That's why we have to reach an agreement in a week's time".

While Russia is insistent its money should not be accessed, there are additional apprehensions among leaders in Europe that the US may want to employ Russia's frozen billions in another way, as part of its own peace initiative.

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

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