Russia Retaliates at Europe's Plan to Lend Frozen Russian Cash to Kyiv

Kyiv remains facing a severe shortage of funding to keep going its armed forces and economy afloat, after close to 48 months of full-scale conflict with Russia.

For Europe, the solution to filling Ukraine's funding gap of €135.7bn for the following biennium lies in Moscow's immobilized funds sitting in Belgian bank Euroclear, and European Union officials aim to sign that off at their Brussels summit next week.

Moscow's representatives warn the EU plan would be an illegal seizure, and Moscow's monetary authority stated on Friday it was initiating legal action against Euroclear in a Moscow court prior to a final decision is made.

'Only Fair' to Employ Russia's Funds, Argue Ukraine and the EU

In total, Russia has roughly €210bn of its state reserves blocked in the EU, and €185bn of that is managed by Euroclear.

Brussels and Kyiv argue that that capital should be used to restore what Russia has laid waste to: Brussels refers to it as a "reconstruction loan" and has proposed a plan to support Ukraine's economy valued at €90bn.

"It is appropriate that Moscow's blocked funds should be used to rebuild what Russia has destroyed – and that money then becomes Ukraine's," remarks Ukrainian President Volodymyr Zelensky.

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

The legal move by Moscow was anticipated in Brussels. But it is not only Moscow that is unhappy.

Belgium is worried it will be saddled with an huge bill if it all backfires, and Euroclear chief executive Valérie Urbain warns using the assets could "undermine the world's financial order".

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

Belgium's PM Bart de Wever has given Brussels a series of "logical, sensible, and warranted conditions" before he will agree to the reparations plan, and he has left open the possibility of legal action if it "carries significant risks" for his country.

The Details of the EU's Proposal?

The EU is under pressure prior to next Thursday's summit to come up with a solution that Belgium can support.

So far the EU has held off using the principal funds directly but for the past year has directed the "excess income" from them to Ukraine. In 2024 that amounted to €3.7bn. Legally, using the revenue is deemed safe as Russia is under sanction and the earnings are not Moscow's sovereign assets.

But international military aid for Ukraine has slipped dramatically in 2025, and Europe has had trouble trying to cover the gap caused by the US decision to virtually halt funding Ukraine under President Donald Trump.

There are at the moment two EU plans seeking to supplying Ukraine with €90bn, to finance a majority of its funding needs.

• The first is to raise the money on financial markets, guaranteed by the EU budget as a surety. This is Belgium's first choice but it needs a consensus by EU leaders and that would be challenging when two member states oppose funding Ukraine's military.
• The alternative is providing a loan of Ukraine cash from the Russian assets, which were originally held in financial instruments but have now largely been converted into cash. That funding is an asset of Euroclear located within the European Central Bank.

The EU's executive accepts Belgium has justified fears and claims 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.

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

If Russia went after Belgium itself, any judgment by a Russian court would not be accepted in the EU.

As an important step, EU ambassadors are set to approve on Friday to immobilise Russia's central bank assets held in Europe permanently.

Until now they have had to vote all together every six months to extend 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 stay blocked as long as an "immediate threat to the economic security of the union" continues.

Why Belgium is Not Yet Satisfied

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

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

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

Although the EU might be able to arrange enough guarantees for the loan itself, Belgium worries about an additional danger of being vulnerable to extra fines or liabilities.

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

"Financial institutions need to adhere to stability regulations and shouldn't put all their eggs in one basket. Now the EU is instructing Euroclear to do just that.

"Why do we have these bank rules? It's because we want banks to be stable. And if things fail it would be up to Belgium to rescue Euroclear. That's a further cause why it's so vital for Belgium to obtain ironclad assurances for Euroclear."

The European Union Facing Strain from Multiple Fronts

Time is of the essence, warn several 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 most financially feasible and politically realistic solution".

"It is a decisive moment for us," warns leading German conservative MP Norbert Röttgen. "If the plan collapses, 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 adamant its money should not be touched, there are further worries among EU officials that the US may want to deploy Russia's immobilized billions for another purpose, as part of its own peace plan.

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

An initial document of the US peace plan referred to $100bn of Russia's immobilized capital being used by the US for reconstruction, with the US {taking|receiving