Russia Retaliates at Europe's Plan to Lend Immobilized Moscow's Funds to Ukraine

Ukraine is depleting its funding to sustain its armed forces and economy, after close to 48 months of full-scale conflict with Russia.

In the view of European leaders, the remedy to plugging Ukraine's funding gap of €135.7bn for the following biennium is found in frozen Russian assets located within Belgian bank Euroclear, and European Union officials hope to finalize the plan at their EU leaders' conference next week.

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

'Only Fair' to Employ Moscow's Assets, Argue Kyiv and Brussels

Overall, Russia has approximately €210bn of its funds blocked in the EU, and €185bn of that is held by Euroclear.

The EU and Ukraine maintain that money should be used to reconstruct what Russia has destroyed: EU officials refers to it as a "loan for reparations" and has devised a plan to support Ukraine's economy to the tune of €90bn.

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

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

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

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

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

Belgian Prime Minister Bart de Wever has set the EU a series of "rational, reasonable, and justified conditions" before he will accept the reparations plan, and he has refused to rule out legal action if it "poses significant risks" for his country.

Explaining the EU's Strategy?

European Union officials is racing against time ahead of next Thursday's summit to agree on a solution that Belgium can agree to.

So far the EU has avoided accessing the assets themselves directly but starting in 2024 has paid the "extraordinary revenues" from them to Ukraine. In 2024 that was €3.7bn. Legally, using the revenue is considered permissible as Russia is under sanction and the proceeds are not property of the Russian state.

But global military support for Ukraine has fallen significantly in 2025, and Europe has struggled to make up the gap caused by the US decision to all but stop funding Ukraine under President Donald Trump.

There are currently two EU plans seeking to supplying Ukraine with €90bn, to cover two-thirds of its budgetary necessities.

• One is to borrow the funds on financial markets, guaranteed by the EU budget as a surety. This is Belgium's favored solution but it demands a agreement by all by EU leaders and that would be challenging when Budapest and Bratislava are against funding Ukraine's military.
• This makes the other option lending Ukraine cash from the Russian assets, which were originally held in bonds but have now largely matured into cash. That money is owned by Euroclear held in the European Central Bank.

The European Commission acknowledges Belgium has legitimate concerns and states it is confident it has dealt with them.

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

Should Euroclear suffer a loss 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 targeted Belgium itself, any judgment by a Russian court would not be accepted in the EU.

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

Until now 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 emergency clause under Article 122 of the EU Treaties so the assets stay blocked as long as an "direct danger to the economic interests of the union" continues.

The Reasons Belgium is Not Yet Satisfied

Belgium is insistent it remains a strong supporter of Ukraine, but identifies legal risks in the plan and is concerned about being left to handle the consequences if things go wrong.

A usually divided political landscape in this case has come together in support of Prime Minister Bart de Wever, who is facing pressure from other European officials.

"The Belgian economy is not large. Belgian GDP is about €565bn – imagine if it would need to shoulder a €185bn bill," notes Veerle Colaert, academic specializing in financial regulation at KU Leuven University.

While the EU might be able to arrange adequate guarantees for the loan itself, Belgium is concerned about an further exposure of being vulnerable to extra legal costs.

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

"Financial institutions need to comply with prudential rules and shouldn't put all their eggs in one basket. 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 fail it would fall to Belgium to rescue Euroclear. That's a further cause why it's so important for Belgium to secure water-tight guarantees for Euroclear."

EU Leaders In a Difficult Position from All Sides

Time is of the essence, state seven EU member states including those bordering Russia such as the Baltics, Finland and Poland. They argue the frozen assets plan is "the most financially feasible and practically possible solution".

"This is a crucial test for us," warns leading German conservative MP Norbert Röttgen. "If we fail, I don't know what we'll do subsequently. That's why we have to finalize the deal in a week's time".

While Russia is unyielding its money should not be used, there are further worries among European figures that the US may want to employ Russia's immobilized billions differently, as part of its own peace plan.

Zelensky has said 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 potential collaboration.

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