Moscow Hits Back at Europe's Proposal to Loan Frozen Moscow's Funds to Ukraine

Kyiv remains running out of funding to keep going its military and economy, after close to 48 months of the ongoing invasion by Moscow.

In the view of European leaders, the remedy 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 hope to sign that off at their Brussels summit next week.

Authorities in Russia caution the EU plan would be an illegal seizure, and Russia's central bank declared on Friday it was initiating legal action against Euroclear in a Moscow court prior to a conclusive plan is made.

'Only Fair' to Employ Russia's Assets, Say European and Ukrainian Officials

All told, Russia has about €210bn of its state reserves frozen in the EU, and €185bn of that is held by Euroclear.

European and Ukrainian authorities argue that that capital should be used to reconstruct what Russia has devastated: EU officials refers to it as a "reparations loan" and has come up with a plan to support Ukraine's economy amounting to €90bn.

"It's only fair that Moscow's blocked funds should be used to rebuild what Russia has destroyed – and that that capital then becomes Ukraine's," remarks Ukraine's Volodymyr Zelensky.

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

Moscow's lawsuit was expected in Brussels. But it is not just Moscow that is unhappy.

Authorities in Brussels is concerned it will be left with an massive bill if it all fails, and Euroclear CEO Valérie Urbain argues using the assets could "destabilise the international financial system".

Euroclear also has an approximate €16-17bn frozen 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 agree to the reparations plan, and he has left open the possibility of legal action if it "poses significant risks" for his country.

Explaining the EU's Strategy?

European Union officials is racing against time before next Thursday's summit to agree on a solution that Belgium can agree to.

So far the EU has refrained from using the assets themselves directly but starting in 2024 has directed the "extraordinary revenues" from them to Ukraine. In 2024 that amounted to €3.7bn. From a legal standpoint, using the interest is deemed safe as Russia is under sanction and the proceeds 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 cover the deficit resulting from the US decision to virtually halt funding Ukraine under President Donald Trump.

There are presently two EU plans designed to furnishing Ukraine with €90bn, to finance a large portion of its financial requirements.

• Option one is to secure the capital on the markets, backed by the EU budget as a collateral. This is Belgium's preferred option but it demands a consensus by EU leaders and that would be problematic when Hungary and Slovakia object to funding Ukraine's military.
• The alternative is providing a loan of Ukraine cash from the frozen Russian funds, which were at first held in financial instruments but have now largely matured into cash. That funding is an asset of Euroclear held in the European Central Bank.

Brussels' executive arm recognizes Belgium has valid worries and says it is assured it has addressed them.

The proposal is for Belgium to be protected with a guarantee encompassing all the €210bn of Russian assets in the EU.

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

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

In a key development, EU ambassadors are set to approve on Friday to freeze indefinitely Russia's central bank assets held in Europe indefinitely.

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

The EU ambassadors are expected to use an special provision under Article 122 of the EU Treaties so the assets remain frozen as long as an "direct danger to the economic interests of the union" continues.

The Reasons Belgium is Remains Convinced

The Belgian government is firm it remains a committed partner of Ukraine, but sees regulatory pitfalls in the plan and worries about being forced to deal with the consequences if things go wrong.

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

"Belgium is a small economy. Belgian GDP is approximately €565bn – think about if it would need to shoulder a €185bn bill," comments Veerle Colaert, academic specializing in financial regulation at KU Leuven University.

Although the EU might be able to obtain enough protections for the loan itself, Belgium fears an added risk of being vulnerable to extra legal costs.

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

"Financial institutions need to comply with prudential rules and shouldn't concentrate risk. Now the EU is instructing Euroclear to do just that.

"What is the purpose of these bank rules? It's because we want banks to be secure. And if things fail it would be up to Belgium to bail out Euroclear. That's another reason why it's so crucial for Belgium to get water-tight protections for Euroclear."

The European Union In a Difficult Position from Multiple Fronts

There is no time to lose, state seven EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They argue the proposal to use Russian funds is "the financially feasible and practically possible solution".

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

Although Russia is unyielding its money should not be accessed, there are additional apprehensions among leaders in Europe that the US may want to deploy Russia's immobilized billions differently, as part of its own peace plan.

Zelensky has said Ukraine is coordinating with Europe and the US on a reconstruction fund, but he is also mindful the US has been talking to Russia about future co-operation.

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