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

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

In the view of European leaders, the answer to plugging Ukraine's budget hole of €135.7bn for the next two years is found in assets belonging to Russia that are frozen located within Belgian bank Euroclear, and European Union officials hope to sign that off at their meeting in Brussels next week.

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

'Appropriate' to Employ Russia's Funds, Say Ukraine and the EU

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

The EU and Ukraine contend that that capital should be used to reconstruct what Russia has destroyed: The European Commission terms it a "reconstruction loan" and has proposed a plan to prop up Ukraine's economy valued at €90bn.

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

Germany's leader Friedrich Merz states the assets will "enable Ukraine to defend itself successfully against future Russian attacks".

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

Belgium is worried it will be burdened by an enormous bill if it all backfires, and Euroclear CEO Valérie Urbain says using the assets could "destabilise the world's financial order".

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

The leader of Belgium Bart de Wever has given Brussels a series of "rational, reasonable, and justified conditions" before he will endorse the reparations plan, and he has refused to rule out legal action if it "carries significant risks" for his country.

What is the EU's Proposal?

Brussels is working to the wire ahead of next Thursday's summit to come up with a compromise that Belgium can agree to.

Previously the EU has held off using the assets themselves directly but starting in 2024 has transferred the "excess income" from them to Ukraine. In 2024 that amounted to €3.7bn. Legally, using the interest is considered permissible as Russia is sanctioned and the returns are not Russian sovereign property.

But global military support for Ukraine has fallen significantly in 2025, and Europe has struggled to make up the shortfall caused by the US decision to largely cease funding Ukraine under President Donald Trump.

There are currently two EU plans aimed at supplying Ukraine with €90bn, to finance a majority of its funding needs.

• Option one is to secure the capital on financial markets, secured against the EU budget as a surety. This is Belgium's preferred option but it needs a agreement by all by EU leaders and that would be problematic when two member states oppose funding Ukraine's military.
• This makes the other option lending Ukraine cash from the Moscow's immobilized capital, which were initially held in financial instruments but have now largely been converted into cash. That funding is owned by Euroclear held in the European Central Bank.

The European Commission acknowledges Belgium has valid worries and claims it is convinced it has addressed them.

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

If Euroclear suffer a loss 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.

Should Russia targeted Belgium itself, any decision by a Russian court would not be accepted 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 unanimously every six months to extend the freeze, which could have meant a ongoing risk to Belgium.

The EU ambassadors are set to use an extraordinary measure under Article 122 of the EU Treaties so the assets continue to be immobilized as long as an "direct danger to the financial well-being of the union" continues.

The Reasons Belgium is Not Yet On Board

Belgium is firm it remains a strong supporter of Ukraine, but identifies juridical dangers in the plan and worries about being forced to deal with the repercussions if things fail.

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

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

Although the EU might be able to obtain sufficient assurances for the loan itself, Belgium is concerned about an further exposure of being exposed to extra fines or liabilities.

Prof Colaert also argues the demand for Euroclear to issue credit to the EU would breach EU banking regulations.

"Financial institutions need to follow prudential rules 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 solvent. And if things fail it would fall to Belgium to save Euroclear. That's another reason why it's so crucial for Belgium to obtain water-tight assurances for Euroclear."

EU Leaders Facing Strain from Multiple Fronts

The situation is urgent, warn a group of EU member states including those bordering Russia such as the Baltics, Finland and Poland. They maintain the scheme involving immobilized capital is "the most fiscally viable and politically realistic solution".

"It's a matter of destiny for us," states leading German conservative MP Norbert Röttgen. "If the plan collapses, 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 unyielding its money should not be accessed, there are additional apprehensions among leaders in Europe that the US may want to deploy Russia's frozen billions for another purpose, as part of its own diplomatic proposal.

Zelensky has said Ukraine is coordinating with Europe and the US on a recovery fund, but he is also mindful the US has been holding discussions with Russia about potential collaboration.

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