Moscow Retaliates at Europe's Plan to Loan Frozen Moscow's Assets to Kyiv

Ukraine is depleting its cash to keep going its armed forces and economy afloat, after nearly four years of full-scale conflict with Russia.

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

Authorities in Russia caution 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 ahead of a definitive agreement is made.

'Just' to Employ Moscow's Funds, Say Ukraine and the EU

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

Brussels and Kyiv maintain that those funds should be used to rebuild what Russia has laid waste to: EU officials refers to it as a "reparations loan" and has devised a plan to support Ukraine's economy amounting to €90bn.

"It is appropriate that Russia's frozen assets should be used to rebuild what Russia has devastated – and that money then becomes ours," says Ukraine's Volodymyr Zelensky.

German Chancellor Friedrich Merz states the assets will "enable Ukraine to protect itself successfully against future Russian attacks".

The legal move by Moscow was anticipated in Brussels. But it is not only Moscow that is unhappy.

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

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

Belgium's PM Bart de Wever has presented the EU with a series of "logical, sensible, and warranted conditions" before he will endorse the reconstruction loan scheme, and he has refused to rule out legal action if it "poses significant risks" for his country.

Explaining the EU's Proposal?

European Union officials is racing against time prior to next Thursday's summit to agree on a solution that Belgium can support.

Until now the EU has held off touching the assets themselves directly but for the past year has transferred the "extraordinary revenues" from them to Ukraine. In 2024 that amounted to €3.7bn. From a legal standpoint, using the interest is deemed safe as Russia is under sanction and the returns are not property of the Russian state.

But global military support for Ukraine has slipped dramatically in 2025, and Europe has struggled to make up the deficit caused by the US decision to all but stop funding Ukraine under President Donald Trump.

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

• The first is to borrow the funds on financial markets, guaranteed by the EU budget as a surety. This is Belgium's first choice but it demands a agreement by all by EU leaders and that would be problematic when Hungary and Slovakia oppose funding Ukraine's military.
• This makes the other option providing a loan of Ukraine cash from the Moscow's immobilized capital, which were initially held in securities but have now predominantly matured into cash. That funding is Euroclear property located within the European Central Bank.

Brussels' executive arm acknowledges Belgium has justified fears and claims it is convinced it has dealt with them.

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

Should Euroclear suffer a loss 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.

If Russia targeted Belgium itself, any judgment by a Russian court would not be accepted in the EU.

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

Heretofore 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 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 On Board

Brussels is insistent it remains a staunch ally of Ukraine, but identifies juridical dangers in the plan and fears being shouldering the repercussions if things go wrong.

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

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

Although the EU might be able to arrange adequate assurances for the loan itself, Belgium is concerned about an additional danger of being vulnerable to extra damages or penalties.

Prof Colaert also contends the stipulation for Euroclear to grant a loan to the EU would contravene EU banking regulations.

"Financial institutions need to comply with stability regulations and shouldn't put all their eggs in one basket. Now the EU is telling Euroclear to do precisely that.

"What is the purpose of these banking laws? It's because we want banks to be solvent. And if things fail it would become the responsibility of Belgium to save Euroclear. That's another reason why it's so vital for Belgium to obtain ironclad protections for Euroclear."

The European Union Under Pressure from Multiple Fronts

The situation is urgent, caution a group of EU member states including those closest to Russia such as the Baltics, Finland and Poland. They maintain the proposal to use Russian funds is "the economically realistic 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 afterwards. That's why we have to succeed in a week's time".

Although Russia is unyielding its money should not be touched, there are further worries among EU officials that the US may want to use Russia's blocked funds in another way, as part of its own peace initiative.

Zelensky has said Ukraine is working with Europe and the US on a reconstruction fund, but he is also mindful the US has been talking to Russia about potential collaboration.

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