Moscow Retaliates at Europe's Scheme to Lend Immobilized Russian Funds to Kyiv

Ukraine is depleting its funding to sustain its military and economy, after close to 48 months of Russia's full-scale war.

For Europe, the answer to addressing Ukraine's funding gap of €135.7bn for the next two years lies in Moscow's immobilized funds located within Belgian bank Euroclear, and European Union officials hope to finalize the plan at their meeting in Brussels next week.

Russian officials warn the EU plan would be an act of theft, and Moscow's monetary authority declared on Friday it was initiating legal action against Euroclear in a Moscow court prior to a final decision is made.

'Only Fair' to Use Russia's Funds, Argue Kyiv and Brussels

Overall, Russia has about €210bn of its assets immobilized in the EU, and €185bn of that is held by Euroclear.

European and Ukrainian authorities maintain that money should be used to restore what Russia has devastated: Brussels refers to it as a "reparations loan" and has come up with a plan to support Ukraine's economy to the tune of €90bn.

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

German Chancellor Friedrich Merz states the assets will "help Ukraine to defend itself successfully against any future Russian attacks".

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

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

Euroclear also has an estimated €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 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 racing against time ahead of next Thursday's summit to come up with a compromise that Belgium can agree to.

Previously the EU has held off using the assets themselves directly but for the past year has paid the "excess income" from them to Ukraine. In 2024 that totaled €3.7bn. Juridically, using the interest is seen as safe as Russia is sanctioned and the returns are not Russian sovereign property.

But global military support for Ukraine has declined sharply in 2025, and Europe has had trouble trying to cover the shortfall resulting from the US decision to largely cease funding Ukraine under President Donald Trump.

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

• One is to raise the money on capital markets, guaranteed by the EU budget as a guarantee. This is Belgium's first choice but it needs a unanimous vote by EU leaders and that would be challenging when Budapest and Bratislava are against funding Ukraine's military.
• That leaves providing a loan of Ukraine cash from the frozen Russian funds, which were initially held in bonds but have now predominantly been converted into cash. That capital is an asset of Euroclear deposited at the European Central Bank.

The European Commission recognizes Belgium has legitimate concerns and states it is confident it has resolved them.

The proposal is for Belgium to be protected with a guarantee encompassing 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.

Should Russia targeted Belgium itself, any decision by a Russian court would not be enforced in the EU.

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

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

The Reasons Belgium is Still Not On Board

The Belgian government is insistent it remains a strong supporter of Ukraine, but sees regulatory pitfalls in the plan and fears being forced to deal with the consequences if things fail.

A typically divided political landscape in this case has come together in support of Prime Minister Bart de Wever, who is under pressure from European colleagues.

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

Although the EU might be able to secure enough protections for the loan itself, Belgium is concerned about an further exposure of being subject to extra damages or penalties.

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

"Banks need to follow prudential rules and shouldn't make one enormous loan. Now the EU is telling Euroclear to do exactly that.

"What is the purpose of these banking laws? It's because we want banks to be stable. And if things fail it would fall to Belgium to bail out Euroclear. That's another reason why it's so crucial for Belgium to obtain absolute guarantees for Euroclear."

EU Leaders Facing Strain from Every Direction

The situation is urgent, 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 most financially feasible and practically possible solution".

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

While Russia is adamant its money should not be used, there are additional apprehensions among European figures that the US may want to deploy Russia's frozen billions in another way, as part of its own peace plan.

Zelensky has said Ukraine is in discussions with Europe and the US on a reconstruction 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 frozen assets being used by the US for reconstruction, with the US {taking|receiving