Moscow Hits Back at Europe's Proposal to Lend Frozen Russian Assets to Kyiv

Kyiv remains running out of funding to keep going its military and economy afloat, after close to 48 months of full-scale conflict with Russia.

For Europe, the remedy to filling Kyiv's budget hole of €135.7bn for the next two years is found in frozen Russian assets located within Belgian bank Euroclear, and European Union officials seek to give it the green light at their Brussels summit next week.

Moscow's representatives warn the EU plan would be an act of theft, and Russia's central bank announced on Friday it was initiating legal action against Euroclear in a Moscow court even before a conclusive plan is made.

'Appropriate' to Utilize Moscow's Funds, Argue Ukraine and the EU

All told, Russia has approximately €210bn of its state reserves frozen in the EU, and €185bn of that is managed by Euroclear.

Brussels and Kyiv maintain that that capital should be used to restore what Russia has destroyed: Brussels terms it a "reparations loan" and has devised a plan to prop up 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 ours," says Ukrainian President Volodymyr Zelensky.

German Chancellor Friedrich Merz states the assets will "enable Ukraine to shield itself efficiently against subsequent Russian attacks".

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

The Belgian government is concerned it will be saddled with an enormous bill if it all goes wrong, and Euroclear chief executive Valérie Urbain argues using the assets could "destabilise the global financial architecture".

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

Belgian Prime Minister Bart de Wever has presented the EU with a series of "rational, reasonable, and justified conditions" before he will endorse the reconstruction loan scheme, and he has left open the possibility of legal action if it "poses significant risks" for his country.

The Details of the EU's Strategy?

Brussels is racing against time prior to next Thursday's summit to finalize a arrangement that Belgium can agree to.

Until now the EU has refrained from accessing the principal funds directly but since last year has transferred the "excess income" from them to Ukraine. In 2024 that amounted to €3.7bn. Legally, using the revenue is deemed safe as Russia is sanctioned and the returns are not Russian sovereign property.

But international military aid for Ukraine has declined sharply in 2025, and Europe has had trouble trying to cover the gap left by the US decision to all but stop funding Ukraine under President Donald Trump.

There are currently two EU options designed to supplying Ukraine with €90bn, to pay for two-thirds of its budgetary necessities.

• Option one is to raise the money on financial markets, secured against the EU budget as a guarantee. This is Belgium's preferred option but it needs a consensus by EU leaders and that would be problematic when Budapest and Bratislava are against funding Ukraine's military.
• The alternative is providing a loan of Ukraine cash from the frozen Russian funds, which were initially held in securities but have now largely turned into cash. That money is owned by Euroclear held in the European Central Bank.

The EU's executive recognizes Belgium has legitimate concerns and says it is confident it has dealt with them.

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

If 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.

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

As an important step, EU ambassadors are poised to endorse on Friday to permanently block Russia's central bank assets held in Europe for the foreseeable future.

Heretofore they have had to vote unanimously every six months to continue the freeze, which could have meant a repeated 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 interests of the union" continues.

Why Belgium is Not Yet Satisfied

Brussels is adamant it remains a strong supporter of Ukraine, but sees juridical dangers in the plan and worries about being left to handle the fallout if things fail.

A typically fractured political scene in this case has united behind Prime Minister Bart de Wever, who is facing pressure from European colleagues.

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

Although the EU might be able to arrange adequate guarantees for the loan itself, Belgium worries about an added risk of being subject to extra fines or liabilities.

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

"Lenders need to follow capital and liquidity requirements and shouldn't make one enormous loan. Now the EU is instructing Euroclear to do exactly that.

"Why do we have these banking laws? It's because we want banks to be stable. And if things turn sour it would be up to Belgium to rescue Euroclear. That's an additional reason why it's so vital for Belgium to obtain ironclad guarantees for Euroclear."

The European Union In a Difficult Position from All Sides

The situation is urgent, caution seven EU member states including those bordering Russia such as the Baltics, Finland and Poland. They maintain the scheme involving immobilized capital is "a economically realistic and politically achievable solution".

"It's a matter of destiny for us," says leading German conservative MP Norbert Röttgen. "If we fail, I don't know what we'll do next. That's why we have to finalize the deal in a week's time".

Although Russia is unyielding its money should not be accessed, there are added concerns among leaders in Europe that the US may want to deploy Russia's blocked funds for another purpose, as part of its own diplomatic proposal.

Zelensky has stated Ukraine is working with Europe and the US on a rebuilding fund, but he is also mindful the US has been holding discussions with Russia about future co-operation.

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