Russia Hits Back at the EU's Scheme to Loan Frozen Russian Cash to Ukraine

Kyiv remains depleting its funding to keep going its military and economy afloat, after almost four years of the ongoing invasion by Moscow.

In the view of European leaders, the answer to plugging Ukraine's budget hole of €135.7bn for the coming 24 months rests with frozen Russian assets sitting in Belgian bank Euroclear, and EU leaders hope to sign that off at their meeting in Brussels next week.

Russian officials caution the EU plan would be an illegal seizure, and Russia's central bank announced on Friday it was initiating legal action against Euroclear in a Moscow court even before a conclusive plan is made.

'Just' to Utilize Moscow's Assets, Argue Kyiv and Brussels

All told, Russia has about €210bn of its assets blocked in the EU, and €185bn of that is managed by Euroclear.

Brussels and Kyiv maintain that those funds should be used to rebuild what Russia has laid waste to: The European Commission calls it a "reconstruction loan" and has come up with a plan to prop up Ukraine's economy to the tune of €90bn.

"It is appropriate that Moscow's blocked funds should be used to rebuild what Russia has destroyed – and that money then becomes ours," states Ukrainian President Volodymyr Zelensky.

German Chancellor Friedrich Merz states the assets will "allow Ukraine to defend itself successfully against any future Russian attacks".

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

Belgium is worried it will be burdened by an enormous bill if it all fails, and Euroclear chief executive Valérie Urbain argues using the assets could "disrupt the world's financial order".

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

Belgian Prime Minister Bart de Wever has given Brussels a series of "pragmatic, fair, and legitimate conditions" before he will endorse the reparations plan, and he has not excluded legal action if it "poses 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 finalize a arrangement that Belgium can agree to.

So far the EU has refrained from using 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 interest is deemed permissible as Russia is subject to sanctions and the proceeds are not Russian sovereign property.

But foreign defense assistance for Ukraine has fallen significantly in 2025, and Europe has had trouble trying to make up the gap resulting from the US decision to all but stop funding Ukraine under President Donald Trump.

There are at the moment two EU proposals aimed at providing Ukraine with €90bn, to finance two-thirds of its financial requirements.

• One is to raise the money on capital markets, guaranteed by the EU budget as a guarantee. This is Belgium's preferred option but it requires a consensus by EU leaders and that would be problematic when Hungary and Slovakia are against funding Ukraine's military.
• The alternative is lending Ukraine cash from the Moscow's immobilized capital, which were at first held in securities but have now predominantly matured into cash. That capital is owned by Euroclear deposited at the European Central Bank.

The EU's executive acknowledges Belgium has legitimate concerns and claims it is assured it has dealt with them.

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

If Euroclear suffer a loss 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 targeted Belgium itself, any decision by a Russian court would not be recognized in the EU.

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

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

The EU ambassadors are set to use an special provision 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 Not Yet On Board

Brussels is adamant it remains a committed partner of Ukraine, but identifies legal risks in the plan and fears being left to handle the repercussions if things fail.

A usually fractured political scene in this case has rallied behind Prime Minister Bart de Wever, who is facing pressure from fellow EU leaders.

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

Although the EU might be able to secure sufficient guarantees for the loan itself, Belgium worries about an further exposure of being vulnerable to extra damages or penalties.

Prof Colaert also believes the demand for Euroclear to grant a loan 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 instructing Euroclear to do just that.

"Why do we have these financial regulations? It's because we want banks to be stable. And if things turn sour it would fall to Belgium to bail out Euroclear. That's another reason why it's so important for Belgium to secure absolute guarantees for Euroclear."

EU Leaders Under Pressure from Multiple Fronts

The situation is urgent, state a group of EU member states including those bordering Russia such as the Baltics, Finland and Poland. They maintain the scheme involving immobilized capital is "a economically realistic and politically achievable solution".

"It is a decisive moment for us," warns leading German conservative MP Norbert Röttgen. "If the plan collapses, 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 unyielding its money should not be touched, there are additional apprehensions among leaders in Europe that the US may want to use Russia's frozen billions differently, as part of its own peace plan.

Zelensky has said Ukraine is working with Europe and the US on a recovery fund, but he is also aware the US has been engaging with Russia about future co-operation.

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