Moscow Hits Back at the EU's Scheme to Lend Immobilized Russian Assets to Kyiv

Kyiv remains depleting its financial resources to keep going its military and economy afloat, after close to 48 months of full-scale conflict with Russia.

For Europe, the remedy to plugging Ukraine's budget hole of €135.7bn for the following biennium lies in assets belonging to Russia that are frozen located within Belgian bank Euroclear, and EU leaders aim to give it the green light at their EU leaders' conference next week.

Russian officials state the EU plan would be an illegal seizure, and Russia's central bank stated 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 Funds, Argue Kyiv and Brussels

In total, Russia has approximately €210bn of its state reserves immobilized in the EU, and €185bn of that is in the custody of Euroclear.

European and Ukrainian authorities argue that those funds should be used to reconstruct what Russia has devastated: The European Commission calls it a "reparations loan" and has come up with a plan to support Ukraine's economy amounting to €90bn.

"It is appropriate that the assets frozen from Russia should be used to reconstruct what Russia has destroyed – and that those funds then becomes Ukraine's," remarks Ukrainian President Volodymyr Zelensky.

Germany's leader Friedrich Merz says the assets will "help Ukraine to defend itself successfully against subsequent Russian attacks".

Moscow's lawsuit was anticipated in Brussels. But it is not just Moscow that is unhappy.

The Belgian government is anxious it will be left with an huge bill if it all goes wrong, and Euroclear CEO Valérie Urbain says using the assets could "destabilise the global financial architecture".

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

Belgium's PM Bart de Wever has given Brussels a series of "logical, sensible, and warranted conditions" before he will endorse the reconstruction loan scheme, and he has left open the possibility of legal action if it "poses significant risks" for his country.

Explaining the EU's Proposal?

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

Until now the EU has refrained from accessing the frozen capital directly but starting in 2024 has paid the "windfall profits" from them to Ukraine. In 2024 that amounted to €3.7bn. Legally, using the interest is deemed safe as Russia is subject to sanctions and the returns are not Moscow's sovereign assets.

But foreign defense assistance for Ukraine has fallen significantly in 2025, and Europe has struggled to compensate for the shortfall left by the US decision to all but stop funding Ukraine under President Donald Trump.

There are currently two EU plans aimed at furnishing Ukraine with €90bn, to finance two-thirds of its financial requirements.

• One is to raise the money on financial markets, guaranteed by the EU budget as a collateral. This is Belgium's first choice but it requires a consensus by EU leaders and that would be challenging when two member states object to funding Ukraine's military.
• This makes the other option loaning Ukraine cash from the frozen Russian funds, which were originally held in bonds but have now mostly been converted into cash. That funding is owned by Euroclear held in the European Central Bank.

The European Commission acknowledges Belgium has justified fears and says it is assured it has dealt with them.

The plan is for Belgium to be protected with a insurance encompassing 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 clearing house which are in the EU.

In the event that Russia took legal action against Belgium itself, any ruling by a Russian court would not be recognized in the EU.

In a significant move, EU ambassadors are set to approve on Friday to freeze indefinitely Russia's central bank assets held in Europe permanently.

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

The EU ambassadors are set to use an extraordinary measure under Article 122 of the EU Treaties so the assets stay blocked as long as an "immediate threat to the economic interests of the union" continues.

Why Belgium is Not Yet On Board

Brussels is adamant it remains a strong supporter of Ukraine, but perceives legal risks in the plan and fears being forced to deal with the repercussions if things do not work out.

A usually divided political landscape in this case has rallied behind Prime Minister Bart de Wever, who is being pressured from European colleagues.

"Belgium has a modest-sized economy. Belgian GDP is around €565bn – think about if it would need to bear a €185bn bill," notes Veerle Colaert, academic specializing in financial regulation at KU Leuven University.

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

Prof Colaert also argues the demand for Euroclear to issue credit to the EU would violate EU banking regulations.

"Financial institutions need to comply with capital and liquidity requirements and shouldn't concentrate risk. Now the EU is instructing Euroclear to do just that.

"What is the purpose of these banking laws? It's because we want banks to be stable. And if things fail it would fall to Belgium to bail out Euroclear. That's an additional reason why it's so crucial for Belgium to secure water-tight protections for Euroclear."

EU Leaders Facing Strain from All Sides

Time is of the essence, state several EU member states including those bordering Russia such as the Baltics, Finland and Poland. They maintain the proposal to use Russian funds is "the financially feasible and politically achievable 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 subsequently. That's why we have to finalize the deal in a week's time".

Although Russia is insistent its money should not be accessed, there are additional apprehensions among EU officials that the US may want to employ Russia's frozen billions for another purpose, as part of its own peace initiative.

Zelensky has said Ukraine is coordinating with Europe and the US on a reconstruction fund, but he is also aware the US has been holding discussions with Russia about future co-operation.

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