Russia Retaliates at Europe's Proposal to Loan Frozen Moscow's Cash to Kyiv

Ukraine is depleting its financial resources to maintain its military and economy afloat, after almost four years of the ongoing invasion by Moscow.

From the EU's perspective, the solution to filling Ukraine's financial shortfall of €135.7bn for the following biennium is found in Moscow's immobilized funds sitting in Belgian bank Euroclear, and European Union officials hope to finalize the plan at their EU leaders' conference next week.

Moscow's representatives caution the EU plan would be an illegal seizure, and Russia's central bank declared on Friday it was taking to court Euroclear in a Moscow court ahead of a conclusive plan is made.

'Just' to Use Moscow's Assets, Argue Kyiv and Brussels

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

The EU and Ukraine argue that those funds should be used to reconstruct what Russia has destroyed: The European Commission terms it a "reconstruction loan" and has devised a plan to support Ukraine's economy valued at €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," states Ukraine's Volodymyr Zelensky.

Germany's leader Friedrich Merz argues the assets will "allow Ukraine to protect itself effectively against future Russian attacks".

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

Belgium is anxious it will be saddled with an enormous bill if it all fails, and Euroclear chief executive Valérie Urbain argues using the assets could "disrupt the international financial system".

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

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

The Details of the EU's Proposal?

European Union officials is under pressure prior to next Thursday's summit to agree on a compromise that Belgium can accept.

Previously the EU has held off using the principal funds directly but since last year has transferred the "extraordinary revenues" from them to Ukraine. In 2024 that amounted to €3.7bn. Juridically, using the revenue is seen as less risky as Russia is sanctioned and the proceeds are not Russian sovereign property.

But global military support for Ukraine has declined sharply in 2025, and Europe has found it difficult to make up the deficit resulting from the US decision to virtually halt funding Ukraine under President Donald Trump.

There are currently two EU proposals designed to furnishing Ukraine with €90bn, to cover two-thirds of its budgetary necessities.

• The first is to secure the capital on capital markets, guaranteed by the EU budget as a surety. This is Belgium's favored solution but it demands a unanimous vote by EU leaders and that would be problematic when two member states object to funding Ukraine's military.
• This makes the other option loaning Ukraine cash from the Moscow's immobilized capital, which were at first held in financial instruments but have now largely matured into cash. That money is owned by Euroclear held in the European Central Bank.

Brussels' executive arm acknowledges Belgium has legitimate concerns and claims it is assured it has addressed them.

The proposal 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, 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 decision by a Russian court would not be accepted 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.

Until now they have had to vote by consensus every six months to extend the freeze, which could have meant a constant risk to Belgium.

The EU ambassadors are expected to use an special provision under Article 122 of the EU Treaties so the assets remain frozen as long as an "immediate threat to the financial well-being of the union" continues.

The Reasons Belgium is Not Yet Convinced

Belgium is insistent it remains a staunch ally of Ukraine, but perceives regulatory pitfalls in the plan and fears being left to handle the consequences if things go wrong.

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

"Belgium has a modest-sized economy. Belgian GDP is about €565bn – think about if it would need to bear a €185bn bill," says Veerle Colaert, expert in financial law at KU Leuven University.

While the EU might be able to obtain enough protections for the loan itself, Belgium is concerned about an further exposure of being subject to extra legal costs.

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

"Financial institutions need to comply with capital and liquidity requirements and shouldn't make one enormous loan. Now the EU is telling Euroclear to do precisely that.

"What is the purpose of these bank rules? It's because we want banks to be secure. And if things go wrong it would become the responsibility of Belgium to save Euroclear. That's another reason why it's so vital for Belgium to get absolute guarantees for Euroclear."

EU Leaders 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 "the most fiscally viable 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 finalize the deal in a week's time".

Although Russia is insistent its money should not be touched, there are added concerns among European figures that the US may want to deploy Russia's frozen billions for another purpose, as part of its own peace initiative.

Zelensky has said Ukraine is working with Europe and the US on a recovery fund, but he is also mindful the US has been talking to Russia about future co-operation.

An initial document of the US peace plan suggested $100bn of Russia's frozen assets being used by the US for reconstruction, with the US {taking|receiving