Moscow Retaliates at the EU's Proposal to Lend Immobilized Moscow's Cash to Kyiv

Ukraine is facing a severe shortage of cash to maintain its military and economy afloat, after nearly four years of Russia's full-scale war.

For Europe, the solution to filling Kyiv's funding gap of €135.7bn for the next two years rests with frozen Russian assets sitting in Belgian bank Euroclear, and EU leaders seek to finalize the plan at their EU leaders' conference next week.

Russian officials state the EU plan would be an confiscation, and Russia's central bank announced on Friday it was taking to court Euroclear in a Moscow court ahead of a definitive agreement is made.

'Just' to Employ Moscow's Funds, Say Ukraine and the EU

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

European and Ukrainian authorities argue that that capital should be used to restore what Russia has laid waste to: The European Commission calls it a "reparations loan" and has proposed a plan to support Ukraine's economy valued at €90bn.

"It is appropriate that Moscow's blocked funds should be used to rebuild what Russia has destroyed – and that that capital then becomes ours," remarks Ukrainian President Volodymyr Zelensky.

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

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

The Belgian government is anxious it will be saddled with an massive bill if it all goes wrong, and Euroclear CEO Valérie Urbain warns using the assets could "undermine the international financial system".

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

Belgian Prime Minister Bart de Wever has given Brussels a series of "logical, sensible, and warranted conditions" before he will accept the reconstruction loan scheme, and he has left open the possibility of legal action if it "poses significant risks" for his country.

The Details of the EU's Proposal?

Brussels is working to the wire before next Thursday's summit to finalize a solution that Belgium can accept.

So far the EU has held off accessing the frozen capital directly but starting in 2024 has directed the "windfall profits" from them to Ukraine. In 2024 that totaled €3.7bn. Juridically, using the interest is seen as safe as Russia is subject to sanctions and the returns are not Moscow's sovereign assets.

But global military support for Ukraine has fallen significantly in 2025, and Europe has found it difficult to cover the deficit resulting from the US decision to largely cease funding Ukraine under President Donald Trump.

There are currently two EU proposals seeking to providing Ukraine with €90bn, to pay for a large portion of its budgetary necessities.

• Option one is to raise the money on the markets, backed by the EU budget as a collateral. This is Belgium's preferred option but it needs a unanimous vote by EU leaders and that would be problematic when Hungary and Slovakia object to funding Ukraine's military.
• That leaves providing a loan of Ukraine cash from the frozen Russian funds, which were initially held in bonds but have now mostly been converted into cash. That funding is Euroclear property deposited at the European Central Bank.

The European Commission acknowledges Belgium has valid worries and says it is assured it has dealt with them.

The scheme is for Belgium to be protected 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 clearing house which are in the EU.

Should Russia targeted Belgium itself, any judgment by a Russian court would not be recognized 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.

Heretofore 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 special provision under Article 122 of the EU Treaties so the assets continue to be immobilized as long as an "clear risk to the economic interests of the union" continues.

Why Belgium is Not Yet On Board

Belgium is insistent it remains a staunch ally of Ukraine, but sees legal risks in the plan and worries about being shouldering the repercussions if things fail.

A typically fractured political scene in this case has united behind Prime Minister Bart de Wever, who is under pressure from European colleagues.

"Belgium has a modest-sized economy. Belgian GDP is approximately €565bn – consider 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 arrange sufficient assurances for the loan itself, Belgium worries about an additional danger of being exposed to extra fines or liabilities.

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

"Banks need to adhere to prudential rules and shouldn't make one enormous loan. Now the EU is asking Euroclear to do precisely that.

"What is the purpose of these banking laws? It's because we want banks to be stable. And if things go wrong it would fall to Belgium to save Euroclear. That's another reason why it's so vital for Belgium to secure absolute assurances for Euroclear."

Europe Facing Strain from Every Direction

The situation is urgent, state several EU member states including those bordering Russia such as the Baltics, Finland and Poland. They believe the proposal to use Russian funds is "the fiscally viable and politically realistic solution".

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

While Russia is adamant its money should not be used, there are added concerns among European figures that the US may want to use Russia's immobilized billions for another purpose, as part of its own diplomatic proposal.

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 talking to Russia about potential collaboration.

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