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

Ukraine is facing a severe shortage of financial resources to keep going its military and economy, after almost four years of Russia's full-scale war.

In the view of European leaders, the answer to plugging Kyiv's budget hole of €135.7bn for the coming 24 months is found in assets belonging to Russia that are frozen located within Belgian bank Euroclear, and Brussels seek to sign that off at their Brussels summit next week.

Moscow's representatives warn the EU plan would be an confiscation, and Russia's central bank declared on Friday it was suing Euroclear in a Moscow court prior to a conclusive plan is made.

'Only Fair' to Utilize Russia's Funds, Assert Kyiv and Brussels

Overall, Russia has roughly €210bn of its assets blocked in the EU, and €185bn of that is managed by Euroclear.

European and Ukrainian authorities argue that those funds should be used to restore what Russia has laid waste to: Brussels refers to it as a "loan for reparations" and has devised a plan to support Ukraine's economy amounting to €90bn.

"It is appropriate that Moscow's blocked funds should be used to rebuild what Russia has devastated – and that those funds then becomes ours," states Ukrainian President Volodymyr Zelensky.

German Chancellor Friedrich Merz says the assets will "allow Ukraine to protect itself effectively against any future Russian attacks".

Russia's court action was expected in Brussels. But it is not just Moscow that is unhappy.

The Belgian government is concerned it will be saddled with an huge bill if it all goes wrong, and Euroclear CEO Valérie Urbain argues using the assets could "undermine the international financial system".

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

The leader of Belgium Bart de Wever has given Brussels a series of "logical, sensible, and warranted conditions" before he will accept the reparations plan, and he has refused to rule out legal action if it "presents significant risks" for his country.

Explaining the EU's Proposal?

The EU is working to the wire prior to next Thursday's summit to come up with a arrangement that Belgium can agree to.

Previously the EU has refrained from touching the principal funds directly but starting in 2024 has transferred the "windfall profits" from them to Ukraine. In 2024 that totaled €3.7bn. Juridically, using the profits is seen as safe as Russia is sanctioned and the returns are not property of the Russian state.

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

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

• The first is to raise the money on capital markets, guaranteed by the EU budget as a guarantee. This is Belgium's preferred option but it needs a unanimous vote by EU leaders and that would be problematic when Budapest and Bratislava object to funding Ukraine's military.
• That leaves loaning Ukraine cash from the Moscow's immobilized capital, which were originally held in bonds but have now mostly matured into cash. That money is owned by Euroclear located within the European Central Bank.

The EU's executive recognizes Belgium has valid worries and claims it is assured it has resolved them.

The plan 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, the loss would be compensated from assets belonging to Russia's own clearing house which are in the EU.

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

In a significant move, EU ambassadors are poised to endorse on Friday to immobilise Russia's central bank assets held in Europe permanently.

Heretofore 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 extraordinary measure under Article 122 of the EU Treaties so the assets continue to be immobilized as long as an "direct danger to the financial well-being of the union" continues.

Why Belgium is Not Yet Satisfied

Brussels is firm it remains a committed partner of Ukraine, but identifies regulatory pitfalls in the plan and is concerned about being left to handle the repercussions if things do not work out.

A normally fractured political scene in this case has united behind Prime Minister Bart de Wever, who is under pressure from fellow EU leaders.

"Belgium has a modest-sized economy. Belgian GDP is approximately €565bn – think about if it would need to shoulder a €185bn bill," comments Veerle Colaert, professor of financial law at KU Leuven University.

Although the EU might be able to arrange adequate protections for the loan itself, Belgium worries about an additional danger of being vulnerable to extra damages or penalties.

Prof Colaert also argues 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 concentrate risk. Now the EU is asking Euroclear to do precisely that.

"What is the purpose of these banking laws? It's because we want banks to be stable. And if things go wrong it would become the responsibility of Belgium to bail out Euroclear. That's a further cause why it's so important for Belgium to obtain water-tight assurances for Euroclear."

Europe In a Difficult Position from Every Direction

There is no time to lose, caution several EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They argue the proposal to use Russian funds is "the most fiscally viable and politically achievable solution".

"It is a decisive moment for us," says 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 finalize the deal in a week's time".

While Russia is unyielding its money should not be accessed, there are additional apprehensions among EU officials that the US may want to deploy Russia's blocked funds for another purpose, as part of its own peace initiative.

Zelensky has stated Ukraine is working with Europe and the US on a reconstruction fund, but he is also aware the US has been holding discussions with Russia about possible partnership.

A preliminary version of the US peace plan suggested $100bn of Russia's blocked funds being used by the US for reconstruction, with the US {taking|receiving