Russia Retaliates at the EU's Proposal to Lend Frozen Moscow's Funds to Kyiv

Kyiv remains facing a severe shortage of funding to maintain its armed forces and economy afloat, after nearly four years of the ongoing invasion by Moscow.

In the view of European leaders, the solution to filling Kyiv's budget hole of €135.7bn for the following biennium rests with assets belonging to Russia that are frozen held by Belgian bank Euroclear, and European Union officials seek to finalize the plan at their Brussels summit next week.

Russian officials warn the EU plan would be an act of theft, and Russia's central bank declared on Friday it was suing Euroclear in a Moscow court even before a definitive agreement is made.

'Just' to Utilize Russia's Funds, Argue Kyiv and Brussels

All told, Russia has approximately €210bn of its assets blocked in the EU, and €185bn of that is in the custody of Euroclear.

The EU and Ukraine argue that money should be used to rebuild what Russia has laid waste to: The European Commission refers to it as a "reparations loan" and has devised a plan to bolster Ukraine's economy valued at €90bn.

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

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

The legal move by Moscow was anticipated in Brussels. But it is not only Moscow that is dissatisfied.

The Belgian government is worried it will be saddled with an enormous bill if it all backfires, and Euroclear CEO Valérie Urbain says using the assets could "disrupt the global financial architecture".

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

Belgian Prime Minister Bart de Wever has presented the EU with a series of "logical, sensible, and warranted conditions" before he will accept the reconstruction loan scheme, and he has not excluded legal action if it "presents significant risks" for his country.

The Details of the EU's Strategy?

Brussels is under pressure ahead of next Thursday's summit to come up with a solution that Belgium can accept.

Previously the EU has held off touching the frozen capital directly but for the past year has directed the "windfall profits" from them to Ukraine. In 2024 that was €3.7bn. From a legal standpoint, using the revenue is considered safe as Russia is under sanction and the returns are not property of the Russian state.

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

There are presently two EU plans designed to supplying Ukraine with €90bn, to cover a large portion of its funding needs.

• One is to raise the money on capital markets, secured against the EU budget as a surety. This is Belgium's favored solution but it requires a agreement by all by EU leaders and that would be challenging when Hungary and Slovakia oppose funding Ukraine's military.
• This makes the other option loaning Ukraine cash from the frozen Russian funds, which were at first held in securities but have now predominantly matured into cash. That money is Euroclear property held in the European Central Bank.

Brussels' executive arm acknowledges Belgium has justified fears and says it is confident it has addressed them.

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

Should Euroclear face a financial hit 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.

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

In a key development, EU ambassadors are expected to agree on Friday to permanently block Russia's central bank assets held in Europe for the foreseeable future.

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

The EU ambassadors are set 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 interests of the union" continues.

The Reasons Belgium is Remains Satisfied

Brussels is adamant it remains a strong supporter of Ukraine, but perceives legal risks in the plan and worries about being shouldering the fallout if things go wrong.

A normally divided political landscape in this case has united behind Prime Minister Bart de Wever, who is facing pressure from European colleagues.

"The Belgian economy is not large. Belgian GDP is approximately €565bn – think about if it would need to shoulder a €185bn bill," comments 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 exposed to extra damages or penalties.

Prof Colaert also argues the demand for Euroclear to issue credit to the EU would contravene EU banking regulations.

"Lenders need to follow prudential rules and shouldn't put all their eggs in one basket. Now the EU is telling Euroclear to do precisely that.

"What is the purpose of these banking laws? It's because we want banks to be solvent. And if things go wrong it would be up to Belgium to rescue Euroclear. That's a further cause why it's so important for Belgium to secure absolute protections for Euroclear."

Europe Under Pressure from Every Direction

The situation is urgent, state seven EU member states including those closest to Russia such as the Baltics, Finland and Poland. They maintain the frozen assets plan is "the economically realistic and politically achievable 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 next. That's why we have to finalize the deal in a week's time".

Although Russia is adamant its money should not be accessed, there are further worries among EU officials that the US may want to use Russia's frozen billions for another purpose, as part of its own peace plan.

Zelensky has stated Ukraine is in discussions with Europe and the US on a rebuilding fund, but he is also mindful the US has been talking to Russia about potential collaboration.

A preliminary version of the US peace plan referred to $100bn of Russia's frozen assets being used by the US for reconstruction, with the US {taking|receiving