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

Kyiv remains depleting its financial resources to maintain its military and economy afloat, after close to 48 months of the ongoing invasion by Moscow.

In the view of European leaders, the solution to addressing Kyiv's funding gap of €135.7bn for the coming 24 months rests with frozen Russian assets located within Belgian bank Euroclear, and European Union officials seek to finalize the plan at their EU leaders' conference next week.

Russian officials warn the EU plan would be an illegal seizure, and the Central Bank of Russia stated on Friday it was initiating legal action against Euroclear in a Moscow court even before a definitive agreement is made.

'Appropriate' to Use Moscow's Assets, Argue European and Ukrainian Officials

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

The EU and Ukraine contend that that capital should be used to rebuild what Russia has devastated: EU officials terms it a "reconstruction loan" and has proposed a plan to bolster Ukraine's economy valued at €90bn.

"It is appropriate that the assets frozen from Russia should be used to rebuild what Russia has destroyed – and that that capital then becomes ours," says Ukrainian President Volodymyr Zelensky.

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

Russia's court action was foreseen in Brussels. But it is not just Moscow that is dissatisfied.

Belgium is anxious it will be burdened by an huge bill if it all fails, and Euroclear chief executive Valérie Urbain warns using the assets could "destabilise the world's financial order".

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

Belgium's PM Bart de Wever has set the EU a series of "rational, reasonable, and justified conditions" before he will endorse the reconstruction loan scheme, and he has left open the possibility of legal action if it "carries significant risks" for his country.

The Details of the EU's Plan?

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

Previously the EU has avoided touching the frozen capital directly but for the past year has transferred the "windfall profits" from them to Ukraine. In 2024 that was €3.7bn. From a legal standpoint, using the interest is considered less risky as Russia is sanctioned and the returns are not Moscow's sovereign assets.

But international military aid for Ukraine has declined sharply in 2025, and Europe has struggled to cover the deficit left by the US decision to virtually halt funding Ukraine under President Donald Trump.

There are currently two EU options aimed at furnishing Ukraine with €90bn, to cover two-thirds of its funding needs.

• One is to secure the capital on capital markets, backed by the EU budget as a collateral. This is Belgium's first choice but it demands a consensus by EU leaders and that would be difficult when Budapest and Bratislava object to funding Ukraine's military.
• This makes the other option providing a loan of Ukraine cash from the Russian assets, which were initially held in financial instruments but have now largely been converted into cash. That capital is an asset of Euroclear held in the European Central Bank.

Brussels' executive arm accepts Belgium has legitimate concerns and claims it is confident it has addressed them.

The plan is for Belgium to be protected with a insurance applying to all the €210bn of Russian assets in the EU.

Should Euroclear face a financial hit 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 went after Belgium itself, any ruling by a Russian court would not be recognized in the EU.

In a significant move, EU ambassadors are set to approve on Friday to freeze indefinitely 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 repeated risk to Belgium.

The EU ambassadors are expected to use an extraordinary measure under Article 122 of the EU Treaties so the assets stay blocked as long as an "clear risk to the economic security of the union" continues.

Why Belgium is Not Yet On Board

The Belgian government is insistent it remains a staunch ally of Ukraine, but identifies legal risks in the plan and worries about being shouldering the repercussions if things do not work out.

A normally divided political landscape in this case has rallied behind Prime Minister Bart de Wever, who is facing pressure from fellow EU leaders.

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

While the EU might be able to secure enough guarantees for the loan itself, Belgium worries about an added risk of being subject to extra damages or penalties.

Prof Colaert also argues the requirement for Euroclear to issue credit to the EU would contravene EU banking regulations.

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

"Why do we have these financial regulations? It's because we want banks to be secure. And if things go wrong it would be up to Belgium to rescue Euroclear. That's a further cause why it's so vital for Belgium to secure absolute guarantees for Euroclear."

The European Union In a Difficult Position from Multiple Fronts

Time is of the essence, caution 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".

"It's a matter of destiny for us," says leading German conservative MP Norbert Röttgen. "If the plan collapses, 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 touched, there are additional apprehensions among leaders in Europe that the US may want to employ Russia's immobilized billions for another purpose, as part of its own diplomatic proposal.

Zelensky has said Ukraine is working with Europe and the US on a rebuilding 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 suggested $100bn of Russia's frozen assets being used by the US for reconstruction, with the US {taking|receiving