Moscow Retaliates at the EU's Plan to Loan Frozen Moscow's Cash to Ukraine

Kyiv remains facing a severe shortage of funding to keep going its armed forces and economy, after nearly four years of full-scale conflict with Russia.

From the EU's perspective, the solution to addressing Ukraine's financial shortfall of €135.7bn for the following biennium is found in frozen Russian assets located within Belgian bank Euroclear, and European Union officials aim to finalize the plan at their EU leaders' conference next week.

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

'Only Fair' to Utilize Moscow's Assets, Say European and Ukrainian Officials

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

European and Ukrainian authorities contend that that capital should be used to reconstruct what Russia has laid waste to: EU officials calls it a "reparations loan" and has devised a plan to bolster Ukraine's economy amounting to €90bn.

"It is only just 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.

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

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

Authorities in Brussels is worried it will be left with an enormous bill if it all goes wrong, and Euroclear CEO Valérie Urbain says using the assets could "disrupt the global financial architecture".

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

The leader of Belgium Bart de Wever has set the EU a series of "logical, sensible, and warranted conditions" before he will agree to the reparations plan, and he has left open the possibility of legal action if it "carries significant risks" for his country.

What is the EU's Plan?

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

Until now the EU has avoided accessing the principal funds directly but starting in 2024 has directed the "windfall profits" from them to Ukraine. In 2024 that totaled €3.7bn. Juridically, using the interest is considered safe as Russia is under sanction and the earnings are not Russian sovereign property.

But foreign defense assistance for Ukraine has declined sharply in 2025, and Europe has found it difficult to compensate for the deficit resulting from the US decision to virtually halt funding Ukraine under President Donald Trump.

There are presently two EU options seeking to providing Ukraine with €90bn, to finance a majority of its funding needs.

• The first is to borrow the funds on the markets, guaranteed by the EU budget as a guarantee. This is Belgium's preferred option but it needs a unanimous vote by EU leaders and that would be difficult when Budapest and Bratislava are against funding Ukraine's military.
• That leaves loaning Ukraine cash from the Moscow's immobilized capital, which were initially held in securities but have now predominantly turned into cash. That money is Euroclear property held in the European Central Bank.

Brussels' executive arm accepts Belgium has legitimate concerns and claims it is assured it has resolved them.

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

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

Should Russia went after Belgium itself, any ruling by a Russian court would not be accepted in the EU.

As an important step, EU ambassadors are expected to agree on Friday to permanently block Russia's central bank assets held in Europe permanently.

Previously they have had to vote unanimously every six months to continue the freeze, which could have meant a repeated risk to Belgium.

The EU ambassadors are planning to use an special provision under Article 122 of the EU Treaties so the assets continue to be immobilized as long as an "clear risk to the financial well-being of the union" continues.

Why Belgium is Remains Convinced

The Belgian government is firm it remains a committed partner of Ukraine, but identifies regulatory pitfalls in the plan and is concerned about being forced to deal with the repercussions if things go wrong.

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

"The Belgian economy is not large. Belgian GDP is around €565bn – consider if it would need to carry a €185bn bill," comments Veerle Colaert, expert in financial law at KU Leuven University.

Although the EU might be able to secure adequate assurances for the loan itself, Belgium worries about an additional danger of being subject to extra fines or liabilities.

Prof Colaert also contends the requirement for Euroclear to issue credit to the EU would contravene EU banking regulations.

"Banks need to comply with prudential rules and shouldn't concentrate risk. Now the EU is telling Euroclear to do just that.

"What is the purpose of these financial regulations? It's because we want banks to be secure. And if things turn sour it would be up to Belgium to save Euroclear. That's another reason why it's so crucial for Belgium to secure water-tight protections for Euroclear."

EU Leaders Facing Strain from Every Direction

Time is of the essence, warn seven EU member states including those bordering Russia such as the Baltics, Finland and Poland. They argue the scheme involving immobilized capital is "the economically realistic and politically realistic solution".

"This is a crucial test for us," warns leading German conservative MP Norbert Röttgen. "If we fail, I don't know what we'll do next. That's why we have to succeed in a week's time".

While Russia is insistent its money should not be used, there are additional apprehensions among European figures that the US may want to deploy Russia's frozen billions differently, as part of its own peace initiative.

Zelensky has stated Ukraine is in discussions with Europe and the US on a recovery fund, but he is also aware the US has been engaging with Russia about possible partnership.

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