Russia Retaliates at the EU's Proposal to Loan Frozen Moscow's Assets to Kyiv

Kyiv remains running out of financial resources to sustain its armed forces and economy afloat, after almost four years of the ongoing invasion by Moscow.

In the view of European leaders, the remedy to filling Ukraine's funding gap of €135.7bn for the coming 24 months lies in frozen Russian assets held by Belgian bank Euroclear, and Brussels hope to give it the green light at their EU leaders' conference next week.

Moscow's representatives state the EU plan would be an illegal seizure, and Moscow's monetary authority announced on Friday it was taking to court Euroclear in a Moscow court even before a definitive agreement is made.

'Only Fair' to Utilize Moscow's Assets, Assert European and Ukrainian Officials

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

Brussels and Kyiv maintain that that capital should be used to restore 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 only just that Moscow's blocked funds should be used to rebuild what Russia has devastated – and that those funds then becomes ours," states Ukrainian President Volodymyr Zelensky.

Chancellor Friedrich Merz states the assets will "allow Ukraine to shield itself successfully against any future Russian attacks".

Moscow's lawsuit was anticipated in Brussels. But it is not only Moscow that is concerned.

Belgium is concerned it will be burdened by an massive bill if it all fails, and Euroclear chief executive Valérie Urbain warns using the assets could "destabilise the world's financial order".

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

The leader of Belgium Bart de Wever has given Brussels a series of "pragmatic, fair, and legitimate conditions" before he will endorse the reparations plan, and he has refused to rule out legal action if it "carries significant risks" for his country.

What is the EU's Proposal?

European Union officials is racing against time before next Thursday's summit to finalize a compromise that Belgium can accept.

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

But foreign defense assistance for Ukraine has declined sharply in 2025, and Europe has found it difficult to compensate for the deficit caused by the US decision to all but stop funding Ukraine under President Donald Trump.

There are currently two EU proposals seeking to providing Ukraine with €90bn, to pay for two-thirds of its budgetary necessities.

• The first is to secure the capital on financial markets, secured against the EU budget as a guarantee. This is Belgium's favored solution but it demands a unanimous vote by EU leaders and that would be challenging when Budapest and Bratislava are against funding Ukraine's military.
• This makes the other option loaning Ukraine cash from the Moscow's immobilized capital, which were originally held in financial instruments but have now largely matured into cash. That capital is an asset of Euroclear deposited at the European Central Bank.

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

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

If Euroclear incur losses 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 targeted Belgium itself, any decision by a Russian court would not be recognized in the EU.

As an important step, EU ambassadors are set to approve on Friday to permanently block 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 continue the freeze, which could have meant a repeated risk to Belgium.

The EU ambassadors are planning 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.

The Reasons Belgium is Still Not Convinced

Brussels is insistent it remains a committed partner of Ukraine, but sees regulatory pitfalls in the plan and fears being shouldering the consequences if things fail.

A usually fractured political scene in this case has rallied behind Prime Minister Bart de Wever, who is being pressured from other European officials.

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

Although the EU might be able to arrange sufficient guarantees for the loan itself, Belgium fears an additional danger of being subject to extra fines or liabilities.

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

"Financial institutions need to comply with prudential rules and shouldn't make one enormous loan. Now the EU is telling 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 save Euroclear. That's an additional reason why it's so important for Belgium to secure ironclad guarantees for Euroclear."

EU Leaders Facing Strain from Multiple Fronts

Time is of the essence, warn a group of EU member states including those closest to Russia such as the Baltics, Finland and Poland. They believe the scheme involving immobilized capital is "the fiscally viable and politically achievable solution".

"It is a decisive moment for us," says 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 reach an agreement in a week's time".

While Russia is insistent its money should not be accessed, there are further worries among EU officials that the US may want to use Russia's frozen billions in another way, as part of its own peace initiative.

Zelensky has indicated Ukraine is in discussions with Europe and the US on a rebuilding fund, but he is also mindful the US has been talking to Russia about possible partnership.

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