Russia Retaliates at the EU's Scheme to Lend Immobilized Moscow's Funds to Kyiv

Kyiv remains running out of cash to sustain its military and economy, after nearly four years of the ongoing invasion by Moscow.

From the EU's perspective, the answer to plugging Ukraine's budget hole of €135.7bn for the coming 24 months rests with frozen Russian assets located within Belgian bank Euroclear, and Brussels hope to finalize the plan at their meeting in Brussels next week.

Authorities in Russia state 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 definitive agreement is made.

'Only Fair' to Utilize Moscow's Assets, Assert Ukraine and the EU

In total, Russia has roughly €210bn of its assets blocked in the EU, and €185bn of that is in the custody of Euroclear.

Brussels and Kyiv argue that those funds should be used to reconstruct what Russia has devastated: EU officials calls it a "reparations loan" and has proposed a plan to prop up Ukraine's economy to the tune of €90bn.

"It is appropriate that Russia's frozen assets should be used to rebuild what Russia has devastated – and that money then becomes ours," says Ukrainian President Volodymyr Zelensky.

Germany's leader Friedrich Merz argues the assets will "help Ukraine to protect itself effectively against subsequent Russian attacks".

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

Authorities in Brussels is concerned it will be left with an enormous bill if it all fails, and Euroclear CEO Valérie Urbain warns using the assets could "destabilise the global financial architecture".

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

The leader of Belgium Bart de Wever has presented the EU with a series of "logical, sensible, and warranted conditions" before he will endorse the reconstruction loan scheme, and he has left open the possibility of legal action if it "poses significant risks" for his country.

Explaining the EU's Plan?

European Union officials is racing against time ahead of next Thursday's summit to finalize a compromise that Belgium can accept.

Until now the EU has refrained from touching the assets themselves directly but since last year has paid the "extraordinary revenues" from them to Ukraine. In 2024 that amounted to €3.7bn. From a legal standpoint, using the revenue is seen as permissible as Russia is under sanction and the returns are not Moscow's sovereign assets.

But international military aid for Ukraine has slipped dramatically in 2025, and Europe has struggled to make up the deficit resulting from the US decision to all but stop funding Ukraine under President Donald Trump.

There are at the moment two EU proposals aimed at providing Ukraine with €90bn, to finance a majority of its financial requirements.

• Option one is to borrow the funds on the markets, secured against the EU budget as a surety. This is Belgium's favored solution but it demands a consensus by EU leaders and that would be challenging when two member states are against funding Ukraine's military.
• The alternative is loaning Ukraine cash from the Russian assets, which were originally held in bonds but have now predominantly turned into cash. That funding is Euroclear property held in the European Central Bank.

Brussels' executive arm acknowledges Belgium has legitimate concerns and states it is assured it has dealt with them.

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

If Euroclear suffer a loss 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 judgment by a Russian court would not be enforced in the EU.

As an important step, EU ambassadors are expected to agree on Friday to immobilise Russia's central bank assets held in Europe indefinitely.

Previously they have had to vote unanimously every six months to extend the freeze, which could have meant a constant risk to Belgium.

The EU ambassadors are set to use an special provision under Article 122 of the EU Treaties so the assets stay blocked as long as an "clear risk to the financial well-being of the union" continues.

The Reasons Belgium is Not Yet Convinced

Belgium is adamant it remains a committed partner of Ukraine, but identifies legal risks in the plan and fears being forced to deal with the fallout if things go wrong.

A normally fractured political scene in this case has rallied behind Prime Minister Bart de Wever, who is under pressure from other European officials.

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

While the EU might be able to arrange adequate protections for the loan itself, Belgium fears an additional danger of being vulnerable to extra legal costs.

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

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

"What is the purpose of these financial regulations? It's because we want banks to be secure. And if things fail it would be up to Belgium to rescue Euroclear. That's a further cause why it's so crucial for Belgium to get ironclad protections for Euroclear."

The European Union In a Difficult Position from Multiple Fronts

There is no time to lose, caution seven EU member states including those closest to Russia such as the Baltics, Finland and Poland. They argue the frozen assets plan is "a economically realistic and politically achievable 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 finalize the deal in a week's time".

Although Russia is unyielding its money should not be used, there are additional apprehensions among EU officials that the US may want to deploy 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 recovery fund, but he is also cognizant 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