Russia Hits Back at the EU's Scheme to Loan Immobilized Moscow's Funds to Ukraine

Ukraine is running out of cash to sustain its military and economy afloat, after almost four years of the ongoing invasion by Moscow.

For Europe, the answer to filling Ukraine's budget hole of €135.7bn for the next two years is found in Moscow's immobilized funds held by Belgian bank Euroclear, and EU leaders hope to sign that off at their Brussels summit next week.

Moscow's representatives caution the EU plan would be an illegal seizure, and Russia's central bank announced on Friday it was initiating legal action against Euroclear in a Moscow court ahead of a conclusive plan is made.

'Appropriate' to Utilize Moscow's Funds, Argue European and Ukrainian Officials

In total, Russia has roughly €210bn of its state reserves frozen in the EU, and €185bn of that is managed by Euroclear.

Brussels and Kyiv contend that money should be used to rebuild what Russia has laid waste to: EU officials terms it a "loan for reparations" and has proposed a plan to bolster Ukraine's economy to the tune of €90bn.

"It's only fair that Russia's frozen assets should be used to rebuild what Russia has devastated – and that those funds then becomes Ukraine's," states Ukraine's Volodymyr Zelensky.

Germany's leader Friedrich Merz says the assets will "help Ukraine to protect itself efficiently against any future Russian attacks".

Russia's court action was anticipated in Brussels. But it is not only Moscow that is dissatisfied.

Authorities in Brussels is worried it will be saddled with an massive bill if it all backfires, and Euroclear chief executive Valérie Urbain says using the assets could "undermine the international financial system".

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

The leader of Belgium Bart de Wever has set the EU a series of "logical, sensible, and warranted conditions" before he will endorse the reparations plan, and he has not excluded legal action if it "presents significant risks" for his country.

The Details of 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 support.

So far the EU has held off accessing the frozen capital directly but starting in 2024 has paid the "excess income" 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 international military aid for Ukraine has declined sharply in 2025, and Europe has struggled to cover the deficit resulting from the US decision to largely cease funding Ukraine under President Donald Trump.

There are currently two EU options seeking to furnishing Ukraine with €90bn, to cover a large portion of its budgetary necessities.

• The first is to borrow the funds on capital markets, backed by the EU budget as a surety. This is Belgium's first choice but it requires a agreement by all by EU leaders and that would be difficult when two member states object to funding Ukraine's military.
• The alternative is loaning Ukraine cash from the Moscow's immobilized capital, which were originally held in financial instruments but have now mostly turned into cash. That money is Euroclear property located within the European Central Bank.

The EU's executive recognizes Belgium has justified fears and says it is assured it has addressed them.

The proposal is for Belgium to be shielded with a insurance applying to 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.

In the event that Russia went after Belgium itself, any judgment by a Russian court would not be enforced in the EU.

In a significant move, EU ambassadors are set to approve on Friday to immobilise Russia's central bank assets held in Europe for the foreseeable future.

Until now they have had to vote all together every six months to renew the freeze, which could have meant a ongoing risk to Belgium.

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

Why Belgium is Not Yet Convinced

The Belgian government is insistent it remains a strong supporter of Ukraine, but perceives juridical dangers in the plan and fears being shouldering the fallout if things do not work out.

A usually fractured political scene in this case has united behind Prime Minister Bart de Wever, who is being pressured from fellow EU leaders.

"Belgium has a modest-sized economy. Belgian GDP is around €565bn – imagine if it would need to shoulder a €185bn bill," comments Veerle Colaert, expert in financial law at KU Leuven University.

While the EU might be able to secure sufficient assurances for the loan itself, Belgium is concerned about an additional danger of being subject to extra damages or penalties.

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

"Banks need to adhere to prudential rules and shouldn't put all their eggs in one basket. Now the EU is asking Euroclear to do precisely that.

"Why do we have these financial regulations? It's because we want banks to be secure. 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 ironclad guarantees for Euroclear."

The European Union Under Pressure from All Sides

There is no time to lose, caution a group of EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They argue the frozen assets plan is "a fiscally viable and practically possible solution".

"It is a decisive moment for us," says leading German conservative MP Norbert Röttgen. "If we fail, I don't know what we'll do afterwards. That's why we have to succeed in a week's time".

While Russia is insistent its money should not be touched, there are added concerns among EU officials that the US may want to employ Russia's immobilized billions in another way, as part of its own peace plan.

Zelensky has indicated Ukraine is working with Europe and the US on a rebuilding fund, but he is also cognizant the US has been engaging with Russia about future co-operation.

A preliminary version of the US peace plan suggested $100bn of Russia's blocked funds being used by the US for reconstruction, with the US {taking|receiving