Russia Hits Back at the EU's Proposal to Loan Frozen Russian Funds to Ukraine

Kyiv remains running out of financial resources to keep going its military and economy afloat, after close to 48 months of the ongoing invasion by Moscow.

In the view of European leaders, the solution to filling Ukraine's funding gap of €135.7bn for the following biennium is found in frozen Russian assets sitting in Belgian bank Euroclear, and EU leaders hope to give it the green light at their meeting in Brussels next week.

Moscow's representatives state the EU plan would be an illegal seizure, and the Central Bank of Russia declared on Friday it was initiating legal action against Euroclear in a Moscow court even before a conclusive plan is made.

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

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

The EU and Ukraine maintain that those funds should be used to reconstruct what Russia has laid waste to: Brussels terms it a "reconstruction loan" and has proposed a plan to prop up Ukraine's economy amounting to €90bn.

"It is only just that the assets frozen from Russia should be used to rebuild what Russia has devastated – and that that capital then becomes Ukraine's," states Ukraine's Volodymyr Zelensky.

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

Moscow's lawsuit was foreseen in Brussels. But it is not just Moscow that is concerned.

The Belgian government is worried it will be left with an huge bill if it all backfires, and Euroclear CEO Valérie Urbain warns using the assets could "undermine the world's financial order".

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

Belgian Prime Minister Bart de Wever has set the EU a series of "rational, reasonable, and justified conditions" before he will endorse the reconstruction loan scheme, and he has refused to rule out legal action if it "presents significant risks" for his country.

The Details of the EU's Plan?

The EU is under pressure before next Thursday's summit to finalize a solution that Belgium can accept.

So far the EU has held off using the frozen capital directly but for the past year has directed the "windfall profits" from them to Ukraine. In 2024 that amounted to €3.7bn. Legally, using the revenue is considered less risky as Russia is under sanction and the returns are not Russian sovereign property.

But international military aid for Ukraine has slipped dramatically in 2025, and Europe has struggled to compensate for the deficit resulting from the US decision to virtually halt funding Ukraine under President Donald Trump.

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

• Option one is to secure the capital on capital markets, secured against the EU budget as a collateral. This is Belgium's favored solution but it requires a agreement by all by EU leaders and that would be difficult when Hungary and Slovakia are against funding Ukraine's military.
• The alternative is lending Ukraine cash from the Moscow's immobilized capital, which were initially held in securities but have now predominantly matured into cash. That capital is an asset of Euroclear held in the European Central Bank.

Brussels' executive arm acknowledges Belgium has legitimate concerns and states it is assured it has resolved them.

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

If Euroclear face a financial hit of its own assets in Russia, the loss would be compensated from assets belonging to Russia's own settlement agency which are in the EU.

Should Russia targeted Belgium itself, any decision by a Russian court would not be enforced in the EU.

In a significant move, EU ambassadors are poised to endorse on Friday to permanently block Russia's central bank assets held in Europe for the foreseeable future.

Until now they have had to vote unanimously every six months to extend the freeze, which could have meant a ongoing 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 "immediate threat to the economic security of the union" continues.

Why Belgium is Still Not Convinced

Belgium is adamant it remains a strong supporter of Ukraine, but identifies regulatory pitfalls in the plan and is concerned about being forced to deal with the consequences if things go wrong.

A normally fractured political scene in this case has come together in support of Prime Minister Bart de Wever, who is being pressured from European colleagues.

"Belgium is a small economy. Belgian GDP is around €565bn – consider if it would need to shoulder a €185bn bill," notes Veerle Colaert, professor of financial law at KU Leuven University.

While the EU might be able to arrange enough assurances for the loan itself, Belgium is concerned about an additional danger of being vulnerable to extra legal costs.

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

"Financial institutions need to adhere to prudential rules and shouldn't make one enormous loan. Now the EU is telling Euroclear to do exactly that.

"Why do we have these bank rules? It's because we want banks to be stable. And if things fail it would be up to Belgium to bail out Euroclear. That's a further cause why it's so crucial for Belgium to obtain absolute guarantees for Euroclear."

The European Union Under Pressure from All Sides

The situation is urgent, warn several EU member states including those closest to Russia such as the Baltics, Finland and Poland. They believe the frozen assets plan is "the financially feasible and politically realistic solution".

"It's a matter of destiny 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 reach an agreement in a week's time".

While Russia is adamant its money should not be touched, there are additional apprehensions among European figures that the US may want to deploy Russia's blocked funds differently, as part of its own peace plan.

Zelensky has indicated 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 mentioned $100bn of Russia's frozen assets being used by the US for reconstruction, with the US {taking|receiving