Russia Hits Back at Europe's Plan to Loan Frozen Russian Funds to Kyiv

Kyiv remains depleting its cash to sustain its armed forces and economy, after nearly four years of Russia's full-scale war.

For Europe, the answer to filling Kyiv's funding gap of €135.7bn for the next two years rests with assets belonging to Russia that are frozen located within Belgian bank Euroclear, and Brussels seek to sign that off at their EU leaders' conference next week.

Moscow's representatives warn the EU plan would be an illegal seizure, and Moscow's monetary authority stated on Friday it was taking to court Euroclear in a Moscow court prior to a final decision is made.

'Appropriate' to Use Moscow's Funds, Assert Ukraine and the EU

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

The EU and Ukraine contend that those funds should be used to reconstruct what Russia has laid waste to: Brussels terms it a "reconstruction loan" and has devised a plan to support Ukraine's economy amounting to €90bn.

"It is only just that Moscow's blocked funds should be used to reconstruct what Russia has destroyed – and that those funds then becomes ours," says Ukraine's Volodymyr Zelensky.

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

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

The Belgian government is concerned it will be burdened by an massive bill if it all goes wrong, and Euroclear CEO Valérie Urbain says using the assets could "undermine the world's financial order".

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

Belgium's PM Bart de Wever has set the EU a series of "pragmatic, fair, and legitimate conditions" before he will endorse the reparations plan, and he has not excluded legal action if it "presents significant risks" for his country.

The Details of the EU's Strategy?

Brussels is working to the wire ahead of next Thursday's summit to agree on a arrangement that Belgium can accept.

So far the EU has refrained from touching the assets themselves directly but starting in 2024 has directed the "excess income" from them to Ukraine. In 2024 that was €3.7bn. From a legal standpoint, using the revenue is considered less risky as Russia is sanctioned and the returns are not property of the Russian state.

But global military support for Ukraine has declined sharply in 2025, and Europe has had trouble trying to make up the gap left by the US decision to all but stop funding Ukraine under President Donald Trump.

There are at the moment two EU options designed to providing Ukraine with €90bn, to finance a large portion of its funding needs.

• Option one is to raise the money on financial markets, backed by the EU budget as a guarantee. This is Belgium's preferred option but it requires a agreement by all by EU leaders and that would be challenging when two member states object to funding Ukraine's military.
• This makes the other option providing a loan of Ukraine cash from the Moscow's immobilized capital, which were initially held in financial instruments but have now predominantly been converted into cash. That money is owned by Euroclear deposited at the European Central Bank.

The EU's executive accepts Belgium has valid worries and says it is assured it has addressed them.

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

Should Euroclear incur losses of its own assets in Russia, the shortfall would be covered from assets belonging to Russia's own settlement agency which are in the EU.

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

In a significant move, EU ambassadors are expected to agree 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 extend the freeze, which could have meant a constant 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 financial well-being of the union" continues.

Why Belgium is Remains Convinced

Brussels is adamant it remains a committed partner of Ukraine, but perceives regulatory pitfalls in the plan and worries about being forced to deal with the repercussions if things fail.

A usually divided political landscape in this case has united behind Prime Minister Bart de Wever, who is being pressured from European colleagues.

"The Belgian economy is not large. Belgian GDP is approximately €565bn – imagine if it would need to carry a €185bn bill," says Veerle Colaert, professor of financial law at KU Leuven University.

While the EU might be able to secure adequate guarantees for the loan itself, Belgium fears an additional danger of being subject to extra damages or penalties.

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

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

"What is the purpose of these bank rules? It's because we want banks to be solvent. And if things fail it would fall to Belgium to save Euroclear. That's a further cause why it's so crucial for Belgium to obtain water-tight protections for Euroclear."

The European Union Under Pressure from Multiple Fronts

The situation is urgent, caution a group of EU member states including those bordering Russia such as the Baltics, Finland and Poland. They maintain the proposal to use Russian funds is "a economically realistic and practically possible solution".

"It is a decisive moment for us," warns leading German conservative MP Norbert Röttgen. "Should we not succeed, 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 adamant its money should not be accessed, there are additional apprehensions among European figures that the US may want to use Russia's frozen billions in another way, 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 engaging with Russia about possible partnership.

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