Moscow Retaliates at Europe's Scheme to Loan Frozen Russian Assets to Ukraine

Ukraine is depleting its funding to maintain its military and economy afloat, after almost four years of Russia's full-scale war.

In the view of European leaders, the remedy to filling Ukraine's financial shortfall of €135.7bn for the following biennium rests with Moscow's immobilized funds located within Belgian bank Euroclear, and Brussels aim to sign that off at their meeting in Brussels next week.

Russian officials warn the EU plan would be an confiscation, and the Central Bank of Russia stated on Friday it was taking to court Euroclear in a Moscow court even before a final decision is made.

'Only Fair' to Employ Russia's Funds, Assert European and Ukrainian Officials

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

Brussels and Kyiv argue that money should be used to restore what Russia has destroyed: The European Commission refers to it as a "reconstruction loan" and has proposed a plan to support Ukraine's economy amounting to €90bn.

"It's only fair that the assets frozen from Russia should be used to rebuild what Russia has destroyed – and that money then becomes ours," states Ukraine's Volodymyr Zelensky.

Germany's leader Friedrich Merz argues the assets will "enable Ukraine to protect itself successfully against any future Russian attacks".

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

The Belgian government is anxious it will be burdened by an huge bill if it all goes wrong, and Euroclear chief executive Valérie Urbain argues using the assets could "undermine the global financial architecture".

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

The leader of Belgium Bart de Wever has given Brussels 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.

Explaining the EU's Proposal?

The EU is racing against time prior to next Thursday's summit to agree on a arrangement that Belgium can support.

Until now the EU has held off accessing the principal funds directly but starting in 2024 has transferred the "excess income" from them to Ukraine. In 2024 that amounted to €3.7bn. Legally, using the revenue is seen as safe as Russia is sanctioned and the earnings are not Russian sovereign property.

But international military aid for Ukraine has declined sharply in 2025, and Europe has struggled to cover the gap resulting from the US decision to virtually halt funding Ukraine under President Donald Trump.

There are presently two EU options seeking to supplying Ukraine with €90bn, to pay for two-thirds of its financial requirements.

• One is to raise the money on capital markets, backed 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 two member states oppose funding Ukraine's military.
• The alternative is loaning Ukraine cash from the frozen Russian funds, which were at first held in financial instruments but have now predominantly matured into cash. That capital is owned by Euroclear located within the European Central Bank.

The European Commission accepts Belgium has legitimate concerns and says it is assured it has resolved them.

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

Should Euroclear incur losses 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.

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

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

Heretofore they have had to vote by consensus every six months to continue the freeze, which could have meant a ongoing risk to Belgium.

The EU ambassadors are expected to use an extraordinary measure under Article 122 of the EU Treaties so the assets stay blocked as long as an "direct danger to the financial well-being of the union" continues.

Why Belgium is Still Not Convinced

Belgium is adamant it remains a staunch ally of Ukraine, but perceives regulatory pitfalls in the plan and is concerned about being shouldering the consequences if things fail.

A normally divided political landscape in this case has united behind Prime Minister Bart de Wever, who is under pressure from fellow EU leaders.

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

While the EU might be able to secure enough protections for the loan itself, Belgium worries about an further exposure of being vulnerable to extra legal costs.

Prof Colaert also contends the requirement for Euroclear to provide a loan to the EU would violate 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 instructing Euroclear to do exactly that.

"What is the purpose of these bank rules? It's because we want banks to be solvent. And if things fail it would fall to Belgium to rescue Euroclear. That's a further cause why it's so important for Belgium to obtain water-tight protections for Euroclear."

Europe In a Difficult Position from Every Direction

There is no time to lose, state several EU member states including those bordering Russia such as the Baltics, Finland and Poland. They believe the proposal to use Russian funds is "the economically realistic and politically achievable solution".

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

Although Russia is adamant its money should not be used, there are added concerns among leaders in Europe that the US may want to employ Russia's blocked funds differently, as part of its own peace plan.

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

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