Moscow Retaliates at the EU's Scheme to Lend Frozen Moscow's Funds to Ukraine

Ukraine is running out of financial resources to maintain its military and economy, after nearly four years of Russia's full-scale war.

For Europe, the solution to plugging Kyiv's financial shortfall of €135.7bn for the next two years lies in assets belonging to Russia that are frozen sitting in Belgian bank Euroclear, and European Union officials aim to give it the green light at their meeting in Brussels next week.

Russian officials state 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 definitive agreement is made.

'Only Fair' to Utilize Moscow's Assets, Say European and Ukrainian Officials

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

Brussels and Kyiv maintain that money should be used to restore what Russia has destroyed: EU officials calls it a "reconstruction loan" and has come up with a plan to bolster Ukraine's economy valued at €90bn.

"It is only just that the assets frozen from Russia should be used to rebuild what Russia has destroyed – and that that capital then becomes Ukraine's," says Ukraine's Volodymyr Zelensky.

Germany's leader Friedrich Merz says the assets will "allow Ukraine to defend itself effectively against any future Russian attacks".

Moscow's lawsuit was expected in Brussels. But it is not only Moscow that is concerned.

Authorities in Brussels is anxious it will be saddled with an huge bill if it all fails, and Euroclear chief executive Valérie Urbain says using the assets could "destabilise the global financial architecture".

Euroclear also has an roughly €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 accept the reparations plan, and he has not excluded legal action if it "poses significant risks" for his country.

The Details of the EU's Strategy?

The EU is under pressure before next Thursday's summit to agree on a solution that Belgium can agree to.

Previously the EU has refrained from using the frozen capital directly but since last year has directed the "windfall profits" from them to Ukraine. In 2024 that amounted to €3.7bn. Juridically, using the interest is considered less risky as Russia is sanctioned and the returns are not Russian sovereign property.

But foreign defense assistance for Ukraine has fallen significantly in 2025, and Europe has struggled to make up the gap caused by the US decision to virtually halt funding Ukraine under President Donald Trump.

There are presently two EU proposals seeking to furnishing Ukraine with €90bn, to finance a majority of its financial requirements.

• Option one is to raise the money on capital markets, secured against the EU budget as a collateral. This is Belgium's favored solution but it requires a consensus by EU leaders and that would be problematic when Budapest and Bratislava are against funding Ukraine's military.
• The alternative is providing a loan of Ukraine cash from the Russian assets, which were initially held in financial instruments but have now largely turned into cash. That capital is owned by Euroclear located within the European Central Bank.

The EU's executive recognizes Belgium has justified fears and says it is convinced it has addressed them.

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

Should Euroclear incur losses 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.

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

As an important step, EU ambassadors are set to approve on Friday to immobilise Russia's central bank assets held in Europe for the foreseeable future.

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

The EU ambassadors are expected 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 financial well-being of the union" continues.

Why Belgium is Still Not Convinced

The Belgian government is firm it remains a strong supporter of Ukraine, but identifies juridical dangers in the plan and fears being shouldering the repercussions if things go wrong.

A normally partisan political environment in this case has united behind Prime Minister Bart de Wever, who is under pressure from European colleagues.

"The Belgian economy is not large. Belgian GDP is about €565bn – imagine if it would need to carry a €185bn bill," notes Veerle Colaert, professor of financial law at KU Leuven University.

While the EU might be able to secure enough protections for the loan itself, Belgium worries about an added risk 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.

"Financial institutions need to follow capital and liquidity requirements and shouldn't put all their eggs in one basket. Now the EU is telling Euroclear to do just that.

"Why do we have these banking laws? It's because we want banks to be stable. And if things turn sour it would fall to Belgium to rescue Euroclear. That's an additional reason why it's so crucial for Belgium to secure absolute protections for Euroclear."

The European Union Under Pressure from Multiple Fronts

There is no time to lose, warn several EU member states including those closest to Russia such as the Baltics, Finland and Poland. They argue the frozen assets plan is "the economically realistic and politically realistic solution".

"This is a crucial test for us," warns leading German conservative MP Norbert Röttgen. "Should we not succeed, I don't know what we'll do next. That's why we have to succeed in a week's time".

While Russia is unyielding its money should not be used, there are added concerns among EU officials that the US may want to deploy Russia's blocked funds for another purpose, as part of its own peace initiative.

Zelensky has said Ukraine is working with Europe and the US on a rebuilding fund, but he is also mindful the US has been engaging with Russia about future co-operation.

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