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

Kyiv remains running out of funding to sustain its armed forces and economy, after close to 48 months of the ongoing invasion by Moscow.

From the EU's perspective, the solution to filling Kyiv's financial shortfall of €135.7bn for the coming 24 months lies in frozen Russian assets located within Belgian bank Euroclear, and European Union officials hope to give it the green light at their Brussels summit next week.

Russian officials state the EU plan would be an act of theft, and Moscow's monetary authority declared on Friday it was taking to court Euroclear in a Moscow court prior to a definitive agreement is made.

'Appropriate' to Employ Moscow's Assets, Say Ukraine and the EU

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

Brussels and Kyiv argue that money should be used to rebuild what Russia has destroyed: Brussels refers to it as a "reconstruction loan" and has devised a plan to bolster Ukraine's economy valued at €90bn.

"It is appropriate that the assets frozen from Russia should be used to reconstruct what Russia has destroyed – and that those funds then becomes Ukraine's," states Ukraine's Volodymyr Zelensky.

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

Moscow's lawsuit was anticipated in Brussels. But it is not just Moscow that is concerned.

Authorities in Brussels is anxious it will be burdened by an huge bill if it all fails, and Euroclear chief executive Valérie Urbain warns using the assets could "disrupt the global financial architecture".

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

Belgium's PM Bart de Wever has given Brussels 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.

What is the EU's Plan?

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

Until now the EU has avoided using the assets themselves directly but starting in 2024 has paid the "excess income" from them to Ukraine. In 2024 that was €3.7bn. Legally, using the interest is considered permissible as Russia is sanctioned and the earnings are not property of the Russian state.

But foreign defense assistance for Ukraine has declined sharply in 2025, and Europe has found it difficult to compensate for the deficit caused by the US decision to all but stop funding Ukraine under President Donald Trump.

There are at the moment two EU plans designed to furnishing Ukraine with €90bn, to pay for a majority of its financial requirements.

• Option one is to raise the money on financial markets, backed by the EU budget as a surety. This is Belgium's first choice but it requires a consensus by EU leaders and that would be challenging when Hungary and Slovakia object to funding Ukraine's military.
• That leaves loaning Ukraine cash from the frozen Russian funds, which were initially held in securities but have now largely been converted into cash. That funding is owned by Euroclear deposited at the European Central Bank.

The European Commission acknowledges Belgium has valid worries and states it is confident it has addressed them.

The plan is for Belgium to be shielded with a guarantee applying to all the €210bn of Russian assets in the EU.

If Euroclear face a financial hit of its own assets in Russia, the shortfall would be covered from assets belonging to Russia's own clearing house which are in the EU.

In the event that Russia went after Belgium itself, any ruling by a Russian court would not be enforced in the EU.

As an important step, EU ambassadors are poised to endorse on Friday to freeze indefinitely Russia's central bank assets held in Europe for the foreseeable future.

Previously they have had to vote unanimously every six months to extend 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 stay blocked as long as an "clear risk to the economic security of the union" continues.

The Reasons Belgium is Not Yet On Board

Belgium is insistent it remains a committed partner of Ukraine, but identifies regulatory pitfalls in the plan and is concerned about being shouldering the fallout if things do not work out.

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

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

Although the EU might be able to obtain sufficient protections for the loan itself, Belgium worries about an additional danger of being subject to extra legal costs.

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

"Financial institutions need to comply with stability regulations and shouldn't concentrate risk. Now the EU is telling Euroclear to do exactly that.

"Why do we have these banking laws? It's because we want banks to be stable. And if things turn sour it would fall to Belgium to rescue Euroclear. That's another reason why it's so vital for Belgium to get water-tight assurances for Euroclear."

Europe Under Pressure from Every Direction

The situation is urgent, state a group of EU member states including those closest to Russia such as the Baltics, Finland and Poland. They maintain the scheme involving immobilized capital is "the most financially feasible and practically possible solution".

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

Although Russia is adamant its money should not be touched, there are further worries among leaders in Europe that the US may want to employ 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 recovery 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 referred to $100bn of Russia's immobilized capital being used by the US for reconstruction, with the US {taking|receiving