Russia Retaliates at Europe's Scheme to Lend Frozen Moscow's Cash to Ukraine

Kyiv remains depleting its cash to keep going its military and economy, after close to 48 months of Russia's full-scale war.

For Europe, the remedy to filling Kyiv's funding gap of €135.7bn for the next two years rests with frozen Russian assets held by Belgian bank Euroclear, and European Union officials aim to sign that off at their meeting in Brussels next week.

Moscow's representatives warn the EU plan would be an illegal seizure, and Moscow's monetary authority declared on Friday it was initiating legal action against Euroclear in a Moscow court ahead of a conclusive plan is made.

'Only Fair' to Use Moscow's Assets, Assert Kyiv and Brussels

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

The EU and Ukraine contend that those funds should be used to rebuild what Russia has devastated: EU officials terms it a "reconstruction loan" and has come up with a plan to prop up Ukraine's economy valued at €90bn.

"It is appropriate that Russia's frozen assets should be used to rebuild what Russia has devastated – and that money then becomes ours," says Ukraine's Volodymyr Zelensky.

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

The legal move by Moscow was expected in Brussels. But it is not just Moscow that is concerned.

Authorities in Brussels is worried it will be left with an massive bill if it all goes wrong, and Euroclear CEO Valérie Urbain warns using the assets could "destabilise the world's financial order".

Euroclear also has an roughly €16-17bn frozen 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 not excluded legal action if it "poses significant risks" for his country.

What is the EU's Plan?

European Union officials is under pressure prior to next Thursday's summit to agree on a solution that Belgium can agree to.

Until now the EU has held off touching the assets themselves directly but since last year has paid the "windfall profits" from them to Ukraine. In 2024 that totaled €3.7bn. Legally, using the profits is considered permissible as Russia is sanctioned and the earnings are not Russian sovereign property.

But foreign defense assistance for Ukraine has slipped dramatically in 2025, and Europe has found it difficult to compensate for the deficit resulting from the US decision to all but stop funding Ukraine under President Donald Trump.

There are at the moment two EU proposals aimed at providing Ukraine with €90bn, to pay for a majority of its financial requirements.

• Option one is to borrow the funds on the markets, backed by the EU budget as a guarantee. This is Belgium's favored solution but it demands a agreement by all by EU leaders and that would be difficult when Budapest and Bratislava object to funding Ukraine's military.
• That leaves providing a loan of Ukraine cash from the Russian assets, which were originally held in financial instruments but have now largely turned into cash. That funding is an asset of Euroclear held in the European Central Bank.

The European Commission recognizes Belgium has justified fears and says it is confident it has dealt with them.

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

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

In the event that Russia targeted Belgium itself, any judgment by a Russian court would not be accepted in the EU.

In a key development, 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 planning to use an emergency clause under Article 122 of the EU Treaties so the assets remain frozen as long as an "immediate threat to the economic security of the union" continues.

Why Belgium is Remains On Board

Brussels is insistent it remains a staunch ally of Ukraine, but perceives regulatory pitfalls in the plan and fears being forced to deal with the repercussions 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 fellow EU leaders.

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

While the EU might be able to obtain sufficient guarantees for the loan itself, Belgium is concerned about an further exposure of being subject to extra damages or penalties.

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

"Lenders need to comply with 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 financial regulations? It's because we want banks to be solvent. And if things turn sour it would be up to Belgium to save Euroclear. That's an additional reason why it's so vital for Belgium to secure absolute assurances for Euroclear."

Europe In a Difficult Position from Multiple Fronts

There is no time to lose, caution 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 practically possible solution".

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

While Russia is unyielding its money should not be used, there are additional apprehensions among European figures that the US may want to use Russia's blocked funds in another way, as part of its own peace plan.

Zelensky has said Ukraine is in discussions with Europe and the US on a reconstruction fund, but he is also aware the US has been holding discussions with Russia about possible partnership.

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