Russia Retaliates at Europe's Proposal to Lend Frozen Moscow's Cash to Kyiv

Kyiv remains depleting its financial resources to sustain its armed forces and economy afloat, after nearly four years of the ongoing invasion by Moscow.

For Europe, the answer to addressing Ukraine's budget hole of €135.7bn for the next two years lies in frozen Russian assets sitting in Belgian bank Euroclear, and Brussels aim to sign that off at their meeting in Brussels next week.

Russian officials state the EU plan would be an illegal seizure, and the Central Bank of Russia announced on Friday it was initiating legal action against Euroclear in a Moscow court ahead of a final decision is made.

'Appropriate' to Employ Russia's Assets, Assert European and Ukrainian Officials

Overall, Russia has approximately €210bn of its state reserves blocked 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 rebuild what Russia has destroyed: EU officials calls it a "reconstruction loan" and has proposed a plan to support Ukraine's economy valued at €90bn.

"It's only fair that Moscow's blocked funds should be used to reconstruct what Russia has destroyed – and that that capital then becomes ours," states Ukrainian President Volodymyr Zelensky.

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

Moscow's lawsuit was foreseen in Brussels. But it is not just Moscow that is concerned.

The Belgian government is anxious it will be saddled with an enormous bill if it all backfires, and Euroclear CEO Valérie Urbain argues using the assets could "disrupt the international financial system".

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

Belgian Prime Minister Bart de Wever has presented the EU with a series of "rational, reasonable, and justified conditions" before he will endorse the reparations plan, and he has left open the possibility of legal action if it "presents significant risks" for his country.

The Details of the EU's Proposal?

The EU is under pressure ahead of next Thursday's summit to agree on a compromise that Belgium can support.

So far the EU has held off touching the frozen capital directly but since last year has paid the "windfall profits" from them to Ukraine. In 2024 that totaled €3.7bn. Juridically, using the interest is seen as permissible as Russia is sanctioned and the proceeds are not Moscow's sovereign assets.

But foreign defense assistance for Ukraine has slipped dramatically in 2025, and Europe has had trouble trying to compensate for the shortfall resulting from the US decision to virtually halt funding Ukraine under President Donald Trump.

There are at the moment two EU options seeking to supplying Ukraine with €90bn, to pay for two-thirds of its budgetary necessities.

• One is to raise the money on financial markets, guaranteed by the EU budget as a collateral. This is Belgium's preferred option but it demands a unanimous vote by EU leaders and that would be challenging when Budapest and Bratislava oppose funding Ukraine's military.
• This makes the other option loaning Ukraine cash from the Moscow's immobilized capital, which were initially held in bonds but have now mostly turned into cash. That funding is owned by Euroclear held in the European Central Bank.

The EU's executive recognizes Belgium has legitimate concerns and says it is convinced it has dealt with them.

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

If Euroclear suffer a loss of its own assets in Russia, that would be offset from assets belonging to Russia's own clearing house which are in the EU.

In the event that Russia targeted Belgium itself, any ruling by a Russian court would not be enforced 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 for the foreseeable future.

Heretofore they have had to vote all together every six months to renew 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 "immediate threat to the economic security of the union" continues.

The Reasons Belgium is Not Yet Convinced

The Belgian government is firm it remains a strong supporter of Ukraine, but identifies regulatory pitfalls in the plan and is concerned about being left to handle the repercussions if things fail.

A usually 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 has a modest-sized economy. Belgian GDP is around €565bn – imagine if it would need to bear a €185bn bill," comments Veerle Colaert, academic specializing in financial regulation at KU Leuven University.

While the EU might be able to secure sufficient guarantees for the loan itself, Belgium fears an additional danger of being exposed to extra fines or liabilities.

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

"Lenders need to adhere to capital and liquidity requirements and shouldn't put all their eggs in one basket. Now the EU is asking Euroclear to do just that.

"Why do we have these bank rules? It's because we want banks to be stable. And if things fail it would become the responsibility of Belgium to save Euroclear. That's an additional reason why it's so crucial for Belgium to obtain ironclad guarantees for Euroclear."

The European Union In a Difficult Position from Multiple Fronts

The situation is urgent, state a group of EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They believe the frozen assets plan is "the most fiscally viable 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 subsequently. 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 added concerns among leaders in Europe that the US may want to use Russia's immobilized billions differently, as part of its own peace initiative.

Zelensky has said 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 possible partnership.

An initial document of the US peace plan suggested $100bn of Russia's blocked funds being used by the US for reconstruction, with the US {taking|receiving