Russia Retaliates at the EU's Proposal to Lend Frozen Moscow's Cash to Kyiv

Ukraine is depleting its funding to keep going its military and economy afloat, after close to 48 months of full-scale conflict with Russia.

For Europe, the solution to filling Kyiv's budget hole of €135.7bn for the following biennium is found in assets belonging to Russia that are frozen sitting in Belgian bank Euroclear, and European Union officials seek to finalize the plan at their EU leaders' conference next week.

Russian officials warn the EU plan would be an act of theft, and Russia's central bank stated on Friday it was suing Euroclear in a Moscow court even before a conclusive plan is made.

'Appropriate' to Utilize Russia's Assets, Assert Kyiv and Brussels

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

Brussels and Kyiv contend that that capital should be used to reconstruct what Russia has laid waste to: Brussels calls it a "loan for reparations" and has proposed a plan to prop up Ukraine's economy to the tune of €90bn.

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

Chancellor Friedrich Merz says the assets will "enable Ukraine to shield itself efficiently against future Russian attacks".

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

The Belgian government is anxious it will be saddled with an massive bill if it all backfires, and Euroclear CEO Valérie Urbain argues using the assets could "disrupt the world's financial order".

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

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

The Details of the EU's Proposal?

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

Previously the EU has avoided touching the assets themselves directly but starting in 2024 has directed the "excess income" from them to Ukraine. In 2024 that amounted to €3.7bn. Legally, using the revenue is considered less risky as Russia is subject to sanctions and the proceeds are not Russian sovereign property.

But foreign defense assistance for Ukraine has declined sharply in 2025, and Europe has struggled to cover the deficit resulting from the US decision to all but stop funding Ukraine under President Donald Trump.

There are at the moment two EU plans seeking to supplying Ukraine with €90bn, to finance two-thirds of its budgetary necessities.

• One is to raise the money 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 problematic when Budapest and Bratislava oppose funding Ukraine's military.
• That leaves lending Ukraine cash from the Russian assets, which were at first held in securities but have now largely been converted into cash. That money is an asset of Euroclear held in the European Central Bank.

The EU's executive recognizes Belgium has valid worries and says it is convinced it has addressed them.

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

Should Euroclear incur losses of its own assets in Russia, that would be offset from assets belonging to Russia's own settlement agency which are in the EU.

Should Russia took legal action against Belgium itself, any decision by a Russian court would not be enforced in the EU.

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

Previously they have had to vote by consensus every six months to renew the freeze, which could have meant a repeated risk to Belgium.

The EU ambassadors are expected to use an emergency clause under Article 122 of the EU Treaties so the assets remain frozen as long as an "direct danger to the economic security of the union" continues.

Why Belgium is Still Not Satisfied

Belgium is firm it remains a committed partner of Ukraine, but perceives regulatory pitfalls in the plan and worries about being forced to deal with the consequences if things do not work out.

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

"The Belgian economy is not large. Belgian GDP is about €565bn – think about if it would need to carry a €185bn bill," says Veerle Colaert, professor of financial law at KU Leuven University.

Although the EU might be able to obtain sufficient protections for the loan itself, Belgium fears an additional danger of being vulnerable to extra legal costs.

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

"Lenders 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 bank rules? It's because we want banks to be secure. And if things fail it would be up to Belgium to bail out Euroclear. That's a further cause why it's so important for Belgium to get ironclad assurances for Euroclear."

EU Leaders In a Difficult Position from All Sides

There is no time to lose, warn seven EU member states including those closest to Russia such as the Baltics, Finland and Poland. They argue the proposal to use Russian funds is "the 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 subsequently. That's why we have to reach an agreement in a week's time".

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

Zelensky has indicated Ukraine is working with Europe and the US on a recovery fund, but he is also aware the US has been engaging with Russia about potential collaboration.

An early draft of the US peace plan mentioned $100bn of Russia's blocked funds being used by the US for reconstruction, with the US {taking|receiving