Russia Retaliates at Europe's Proposal to Lend Immobilized Moscow's Assets to Kyiv

Ukraine is depleting its financial resources to sustain its military and economy afloat, after nearly four years of full-scale conflict with Russia.

In the view of European leaders, the remedy to plugging Ukraine's funding gap of €135.7bn for the following biennium lies in frozen Russian assets sitting in Belgian bank Euroclear, and European Union officials hope to finalize the plan at their EU leaders' conference next week.

Russian officials 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 final decision is made.

'Only Fair' to Utilize Russia's Funds, Say European and Ukrainian Officials

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

Brussels and Kyiv argue that that capital should be used to rebuild what Russia has destroyed: Brussels refers to it as a "reparations loan" and has come up with a plan to support Ukraine's economy to the tune of €90bn.

"It's only fair that the assets frozen from Russia should be used to reconstruct what Russia has devastated – and that those funds then becomes ours," says Ukrainian President Volodymyr Zelensky.

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

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

Authorities in Brussels is concerned it will be burdened by an huge bill if it all backfires, and Euroclear chief executive Valérie Urbain warns using the assets could "disrupt the world's financial order".

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

The leader of Belgium Bart de Wever has given Brussels a series of "pragmatic, fair, and legitimate conditions" before he will agree to the reconstruction loan scheme, and he has left open the possibility of legal action if it "carries significant risks" for his country.

Explaining the EU's Plan?

The EU is working to the wire ahead of next Thursday's summit to finalize a arrangement that Belgium can agree to.

Until now the EU has avoided using the frozen capital directly but starting in 2024 has directed the "excess income" from them to Ukraine. In 2024 that was €3.7bn. Legally, using the interest is deemed permissible as Russia is sanctioned and the returns are not Moscow's sovereign assets.

But global military support for Ukraine has declined sharply in 2025, and Europe has had trouble trying to cover the shortfall left by the US decision to all but stop funding Ukraine under President Donald Trump.

There are currently two EU proposals seeking to supplying Ukraine with €90bn, to cover a majority of its financial requirements.

• One is to secure the capital on the markets, backed by the EU budget as a collateral. This is Belgium's first choice but it demands a unanimous vote by EU leaders and that would be problematic when two member states are against funding Ukraine's military.
• The alternative is lending Ukraine cash from the frozen Russian funds, which were initially held in financial instruments but have now mostly matured into cash. That funding is owned by Euroclear located within the European Central Bank.

The European Commission recognizes Belgium has justified fears and says it is confident it has dealt with them.

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

If Euroclear face a financial hit 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 went after Belgium itself, any judgment by a Russian court would not be enforced in the EU.

As an important step, EU ambassadors are set to approve on Friday to freeze indefinitely Russia's central bank assets held in Europe indefinitely.

Heretofore they have had to vote by consensus every six months to renew the freeze, which could have meant a ongoing risk to Belgium.

The EU ambassadors are expected to use an special provision under Article 122 of the EU Treaties so the assets remain frozen as long as an "immediate threat to the economic interests of the union" continues.

Why Belgium is Remains Satisfied

The Belgian government is insistent it remains a strong supporter of Ukraine, but perceives legal risks in the plan and fears being shouldering the repercussions if things go wrong.

A usually fractured political scene in this case has united behind Prime Minister Bart de Wever, who is facing pressure from other European officials.

"Belgium is a small economy. Belgian GDP is approximately €565bn – consider if it would need to bear a €185bn bill," notes Veerle Colaert, expert in financial law at KU Leuven University.

While the EU might be able to secure adequate assurances for the loan itself, Belgium is concerned about an added risk of being vulnerable to extra legal costs.

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

"Financial institutions need to follow prudential rules and shouldn't concentrate risk. Now the EU is instructing Euroclear to do precisely that.

"What is the purpose of these banking laws? It's because we want banks to be secure. And if things turn sour it would fall to Belgium to bail out Euroclear. That's another reason why it's so crucial for Belgium to get absolute guarantees for Euroclear."

The European Union In a Difficult Position from Multiple Fronts

There is no time to lose, state seven EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They believe the frozen assets plan is "the most economically realistic and practically possible solution".

"It's a matter of destiny 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 succeed in a week's time".

While Russia is unyielding its money should not be used, there are additional apprehensions among European figures 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 in discussions with Europe and the US on a rebuilding fund, but he is also aware the US has been engaging with Russia about possible partnership.

A preliminary version of the US peace plan referred to $100bn of Russia's immobilized capital being used by the US for reconstruction, with the US {taking|receiving