Russia Hits Back at Europe's Proposal to Loan Frozen Moscow's Assets to Kyiv

Kyiv remains running out of cash to keep going its armed forces and economy, after almost four years of the ongoing invasion by Moscow.

For Europe, the answer 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 seek to give it the green light at their EU leaders' conference next week.

Moscow's representatives caution the EU plan would be an confiscation, and the Central Bank of Russia stated on Friday it was initiating legal action against Euroclear in a Moscow court even before a conclusive plan is made.

'Just' to Employ Russia's Funds, Assert European and Ukrainian Officials

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

Brussels and Kyiv maintain that money should be used to rebuild what Russia has devastated: EU officials calls it a "reparations loan" and has proposed a plan to support Ukraine's economy valued at €90bn.

"It's only fair that the assets frozen from Russia should be used to reconstruct what Russia has devastated – and that those funds then becomes ours," remarks Ukrainian President Volodymyr Zelensky.

German Chancellor Friedrich Merz states the assets will "help Ukraine to defend itself efficiently against subsequent Russian attacks".

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

Belgium is worried it will be saddled with an massive bill if it all fails, and Euroclear chief executive Valérie Urbain argues using the assets could "undermine the world's financial order".

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

Belgium's PM Bart de Wever has presented the EU with a series of "rational, reasonable, and justified conditions" before he will agree to the reconstruction loan scheme, and he has refused to rule out legal action if it "presents significant risks" for his country.

Explaining the EU's Proposal?

Brussels is racing against time ahead of next Thursday's summit to finalize a solution that Belgium can accept.

So far the EU has held off 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. Legally, using the interest is seen as permissible as Russia is under sanction and the earnings are not Russian sovereign property.

But foreign defense assistance for Ukraine has slipped dramatically in 2025, and Europe has struggled to compensate for the deficit caused by the US decision to virtually halt funding Ukraine under President Donald Trump.

There are currently two EU plans designed to furnishing Ukraine with €90bn, to finance a majority of its financial requirements.

• One is to secure the capital on the markets, backed by the EU budget as a surety. This is Belgium's favored solution but it requires a unanimous vote by EU leaders and that would be difficult when Budapest and Bratislava are against funding Ukraine's military.
• This makes the other option lending Ukraine cash from the Russian assets, which were originally held in bonds but have now predominantly turned into cash. That capital is owned by Euroclear deposited at the European Central Bank.

The European Commission acknowledges Belgium has valid worries and claims it is assured it has dealt with them.

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

If Euroclear face a financial hit of its own assets in Russia, that would be offset from assets belonging to Russia's own clearing house which are in the EU.

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

In a significant move, EU ambassadors are poised to endorse 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 continue the freeze, which could have meant a ongoing risk to Belgium.

The EU ambassadors are planning 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 economic interests of the union" continues.

The Reasons Belgium is Remains Convinced

The Belgian government is insistent it remains a committed partner of Ukraine, but sees juridical dangers in the plan and fears being forced to deal with the fallout if things do not work out.

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

"The Belgian economy is not large. Belgian GDP is around €565bn – imagine if it would need to shoulder a €185bn bill," notes Veerle Colaert, academic specializing in financial regulation at KU Leuven University.

While the EU might be able to arrange adequate guarantees for the loan itself, Belgium fears an additional danger of being vulnerable to extra fines or liabilities.

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

"Banks need to comply with capital and liquidity requirements and shouldn't concentrate risk. Now the EU is asking Euroclear to do precisely that.

"What is the purpose of these banking laws? 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 important for Belgium to get absolute assurances for Euroclear."

The European Union Facing Strain from All Sides

Time is of the essence, warn several EU member states including those bordering Russia such as the Baltics, Finland and Poland. They argue the proposal to use Russian funds is "the most fiscally viable and politically achievable solution".

"This is a crucial test for us," says leading German conservative MP Norbert Röttgen. "If we fail, 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 adamant its money should not be touched, there are further worries among leaders in Europe that the US may want to deploy Russia's frozen billions in another way, as part of its own diplomatic proposal.

Zelensky has said Ukraine is in discussions with Europe and the US on a recovery fund, but he is also cognizant the US has been engaging with Russia about future co-operation.

A preliminary version of the US peace plan referred to $100bn of Russia's frozen assets being used by the US for reconstruction, with the US {taking|receiving