Moscow Retaliates at Europe's Scheme to Loan Frozen Moscow's Funds to Kyiv

Kyiv remains facing a severe shortage of cash to keep going its military and economy, after nearly four years of the ongoing invasion by Moscow.

For Europe, the solution to addressing Ukraine's budget hole of €135.7bn for the next two years rests with Moscow's immobilized funds located within Belgian bank Euroclear, and European Union officials hope to give it the green light at their meeting in Brussels next week.

Russian officials warn the EU plan would be an act of theft, and Russia's central bank stated on Friday it was suing Euroclear in a Moscow court ahead of a conclusive plan is made.

'Only Fair' to Employ Russia's Assets, Argue Kyiv and Brussels

Overall, Russia has about €210bn of its state reserves frozen in the EU, and €185bn of that is in the custody of Euroclear.

Brussels and Kyiv contend that those funds should be used to reconstruct what Russia has laid waste to: The European Commission refers to it as a "reconstruction loan" and has proposed a plan to prop up Ukraine's economy amounting to €90bn.

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

Chancellor Friedrich Merz says the assets will "allow Ukraine to defend itself effectively against future Russian attacks".

Moscow's lawsuit was anticipated in Brussels. But it is not just Moscow that is unhappy.

Authorities in Brussels is concerned it will be burdened by an massive bill if it all backfires, and Euroclear CEO Valérie Urbain warns using the assets could "disrupt the world's financial order".

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

Belgian Prime Minister Bart de Wever has given Brussels a series of "pragmatic, fair, and legitimate conditions" before he will accept 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 Strategy?

Brussels is racing against time before next Thursday's summit to agree on a compromise that Belgium can accept.

Previously the EU has held off accessing the frozen capital directly but since last year has paid the "windfall profits" from them to Ukraine. In 2024 that totaled €3.7bn. Legally, using the interest is considered safe as Russia is under sanction and the earnings are not Moscow's sovereign assets.

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

There are presently two EU plans aimed at supplying Ukraine with €90bn, to pay for a majority of its financial requirements.

• Option one is to secure the capital on the markets, backed by the EU budget as a guarantee. This is Belgium's first choice but it requires a unanimous vote by EU leaders and that would be problematic when Hungary and Slovakia oppose funding Ukraine's military.
• The alternative is providing a loan of Ukraine cash from the Moscow's immobilized capital, which were initially held in securities but have now largely matured into cash. That capital is owned by Euroclear held in the European Central Bank.

The EU's executive acknowledges Belgium has legitimate concerns and states it is confident it has resolved them.

The scheme is for Belgium to be protected with a insurance applying to 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.

In the event that Russia went after Belgium itself, any decision by a Russian court would not be recognized in the EU.

As an important step, EU ambassadors are set to approve on Friday to freeze indefinitely Russia's central bank assets held in Europe indefinitely.

Previously they have had to vote unanimously every six months to continue the freeze, which could have meant a ongoing risk to Belgium.

The EU ambassadors are expected to use an emergency clause under Article 122 of the EU Treaties so the assets stay blocked as long as an "immediate threat to the economic interests of the union" continues.

Why Belgium is Still Not On Board

Belgium is firm it remains a staunch ally of Ukraine, but identifies juridical dangers in the plan and fears being shouldering the repercussions if things do not work out.

A usually partisan political environment in this case has come together in support of Prime Minister Bart de Wever, who is being pressured from fellow EU leaders.

"Belgium has a modest-sized economy. Belgian GDP is approximately €565bn – consider if it would need to shoulder a €185bn bill," notes Veerle Colaert, professor of financial law at KU Leuven University.

Although the EU might be able to obtain adequate guarantees for the loan itself, Belgium fears an added risk of being exposed to extra fines or liabilities.

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

"Lenders need to follow capital and liquidity requirements and shouldn't concentrate risk. Now the EU is asking Euroclear to do precisely 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 rescue Euroclear. That's an additional reason why it's so crucial for Belgium to get water-tight assurances for Euroclear."

EU Leaders Facing Strain from Multiple Fronts

The situation is urgent, warn several EU member states including those bordering Russia such as the Baltics, Finland and Poland. They believe the frozen assets plan is "the most economically realistic and practically possible 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 afterwards. That's why we have to finalize the deal in a week's time".

While Russia is adamant its money should not be used, there are additional apprehensions among European figures that the US may want to use Russia's blocked funds for another purpose, as part of its own diplomatic proposal.

Zelensky has stated Ukraine is in discussions with Europe and the US on a rebuilding fund, but he is also aware the US has been holding discussions 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