Moscow Hits Back at the EU's Proposal to Lend Frozen Russian Funds to Kyiv

Kyiv remains running out of cash to maintain its armed forces and economy afloat, after almost four years of the ongoing invasion by Moscow.

For Europe, the solution to plugging Kyiv's budget hole of €135.7bn for the coming 24 months is found in assets belonging to Russia that are frozen located within Belgian bank Euroclear, and European Union officials seek to finalize the plan at their Brussels summit next week.

Authorities in Russia warn the EU plan would be an act of theft, and the Central Bank of Russia announced on Friday it was taking to court Euroclear in a Moscow court prior to a definitive agreement is made.

'Appropriate' to Use Russia's Assets, Argue European and Ukrainian Officials

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

European and Ukrainian authorities maintain that that capital should be used to reconstruct what Russia has destroyed: The European Commission terms it a "reparations loan" and has devised a plan to prop up Ukraine's economy valued at €90bn.

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

Chancellor Friedrich Merz argues the assets will "help Ukraine to shield itself effectively against future Russian attacks".

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

Belgium is anxious 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 presented the EU with a series of "rational, reasonable, and justified conditions" before he will agree to the reparations plan, and he has not excluded legal action if it "poses significant risks" for his country.

What is the EU's Plan?

European Union officials is working to the wire ahead of next Thursday's summit to come up with a compromise that Belgium can accept.

Previously the EU has held off accessing the principal funds directly but since last year has paid the "windfall profits" from them to Ukraine. In 2024 that totaled €3.7bn. From a legal standpoint, using the profits is considered safe as Russia is subject to sanctions and the returns are not Russian sovereign property.

But global military support for Ukraine has fallen significantly in 2025, and Europe has found it difficult to compensate for the gap resulting from the US decision to largely cease funding Ukraine under President Donald Trump.

There are at the moment two EU options aimed at supplying Ukraine with €90bn, to pay for two-thirds of its funding needs.

• One is to secure the capital on capital markets, secured against the EU budget as a guarantee. This is Belgium's preferred option but it needs a agreement by all by EU leaders and that would be challenging 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 mostly matured into cash. That money is owned by Euroclear deposited at the European Central Bank.

The European Commission recognizes Belgium has valid worries and claims it is assured it has resolved them.

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

Should Euroclear face a financial hit 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.

In the event that Russia targeted Belgium itself, any decision by a Russian court would not be recognized in the EU.

In a significant move, EU ambassadors are expected to agree on Friday to freeze indefinitely Russia's central bank assets held in Europe for the foreseeable future.

Previously they have had to vote by consensus every six months to continue 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 continue to be immobilized as long as an "direct danger to the economic security of the union" continues.

Why Belgium is Not Yet Convinced

Belgium is adamant it remains a committed partner of Ukraine, but sees juridical dangers in the plan and fears being left to handle the consequences if things go wrong.

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

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

While the EU might be able to secure enough guarantees for the loan itself, Belgium fears an further exposure of being subject to extra fines or liabilities.

Prof Colaert also believes the requirement for Euroclear to issue credit to the EU would violate EU banking regulations.

"Lenders need to adhere to capital and liquidity requirements 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 banking laws? It's because we want banks to be solvent. And if things go wrong it would fall to Belgium to rescue Euroclear. That's a further cause why it's so important for Belgium to get absolute guarantees for Euroclear."

The European Union Under Pressure from All Sides

Time is of the essence, caution seven EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They believe the scheme involving immobilized capital is "the most fiscally viable and practically possible solution".

"It's a matter of destiny for us," warns leading German conservative MP Norbert Röttgen. "If the plan collapses, I don't know what we'll do next. That's why we have to succeed in a week's time".

Although Russia is adamant its money should not be accessed, there are additional apprehensions among European figures that the US may want to deploy Russia's frozen billions differently, as part of its own diplomatic proposal.

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

A preliminary version 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