Russia Responds at the EU's Proposal to Lend Frozen Moscow's Funds to Ukraine

Kyiv remains running out of financial resources to sustain its military and economy, after close to 48 months of Russia's full-scale war.

In the view of European leaders, the solution to plugging Kyiv's financial shortfall of €135.7bn for the next two years is found in frozen Russian assets sitting in Belgian bank Euroclear, and EU leaders hope to give it the green light at their Brussels summit next week.

Authorities in Russia warn the EU plan would be an illegal seizure, and Moscow's monetary authority declared on Friday it was initiating legal action against Euroclear in a Moscow court even before a conclusive plan is made.

'Only Fair' to Use Moscow's Assets, Assert Ukraine and the EU

In total, Russia has approximately €210bn of its state reserves immobilized in the EU, and €185bn of that is held by Euroclear.

The EU and Ukraine argue that money should be used to reconstruct what Russia has laid waste to: EU officials refers to it as a "reconstruction loan" and has devised a plan to bolster Ukraine's economy to the tune of €90bn.

"It is appropriate that the assets frozen from Russia should be used to rebuild what Russia has devastated – and that those funds then becomes Ukraine's," states Ukrainian President Volodymyr Zelensky.

German Chancellor Friedrich Merz states the assets will "help Ukraine to protect itself effectively against subsequent Russian attacks".

The legal move by Moscow was foreseen in Brussels. But it is not just Moscow that is dissatisfied.

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

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

The leader of Belgium Bart de Wever has given Brussels 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.

The Details of the EU's Strategy?

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

Until now the EU has held off using the assets themselves directly but for the past year has transferred the "windfall profits" from them to Ukraine. In 2024 that amounted to €3.7bn. Juridically, using the revenue is considered safe as Russia is sanctioned and the proceeds are not Russian sovereign property.

But international military aid for Ukraine has declined sharply in 2025, and Europe has found it difficult to compensate for the gap caused by the US decision to all but stop funding Ukraine under President Donald Trump.

There are presently two EU proposals designed to providing Ukraine with €90bn, to finance a large portion of its funding needs.

• Option one is to borrow the funds on financial markets, backed by the EU budget as a guarantee. This is Belgium's favored solution but it needs a agreement by all 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 initially held in financial instruments but have now predominantly turned into cash. That money is Euroclear property deposited at the European Central Bank.

Brussels' executive arm accepts Belgium has justified fears and claims it is assured it has addressed them.

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

If Euroclear suffer a loss of its own assets in Russia, the shortfall would be covered from assets belonging to Russia's own clearing house which are in the EU.

Should Russia targeted 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 freeze indefinitely Russia's central bank assets held in Europe permanently.

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 set to use an extraordinary measure under Article 122 of the EU Treaties so the assets remain frozen as long as an "immediate threat to the economic security of the union" continues.

The Reasons Belgium is Still Not Convinced

The Belgian government is adamant it remains a strong supporter of Ukraine, but identifies regulatory pitfalls in the plan and worries about being forced to deal with the repercussions if things fail.

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

"Belgium is a small economy. Belgian GDP is approximately €565bn – imagine if it would need to bear a €185bn bill," says Veerle Colaert, academic specializing in financial regulation at KU Leuven University.

Although the EU might be able to obtain sufficient assurances for the loan itself, Belgium is concerned about an added risk of being subject to extra damages or penalties.

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

"Financial institutions need to comply with capital and liquidity requirements and shouldn't concentrate risk. Now the EU is asking Euroclear to do precisely that.

"Why do we have these bank rules? It's because we want banks to be solvent. And if things fail it would be up to Belgium to bail out Euroclear. That's an additional reason why it's so vital for Belgium to get ironclad protections for Euroclear."

Europe Facing Strain from Every Direction

The situation is urgent, caution several EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They argue the frozen assets plan is "the fiscally viable and politically realistic solution".

"It's a matter of destiny for us," states 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".

While Russia is unyielding its money should not be used, there are added concerns among European figures that the US may want to employ Russia's immobilized billions differently, as part of its own diplomatic proposal.

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

An initial document of the US peace plan mentioned $100bn of Russia's frozen assets being used by the US for reconstruction, with the US {taking|receiving