Russia Hits Back at the EU's Plan to Loan Frozen Moscow's Funds to Kyiv

Kyiv remains facing a severe shortage of funding to maintain its military and economy, after almost four years of Russia's full-scale war.

From the EU's perspective, the remedy to plugging Kyiv's financial shortfall of €135.7bn for the next two years rests with Moscow's immobilized funds sitting in Belgian bank Euroclear, and Brussels aim to sign that off at their meeting in Brussels next week.

Authorities in Russia caution the EU plan would be an act of theft, and Russia's central bank announced on Friday it was suing Euroclear in a Moscow court even before a definitive agreement is made.

'Only Fair' to Employ Moscow's Funds, Assert European and Ukrainian Officials

All told, Russia has approximately €210bn of its state reserves immobilized in the EU, and €185bn of that is managed by Euroclear.

Brussels and Kyiv maintain that those funds should be used to restore what Russia has destroyed: Brussels refers to it as a "loan for reparations" and has proposed a plan to support Ukraine's economy amounting to €90bn.

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

German Chancellor Friedrich Merz states the assets will "allow Ukraine to shield itself effectively against future Russian attacks".

Moscow's lawsuit was foreseen in Brussels. But it is not only Moscow that is concerned.

The Belgian government is concerned it will be burdened by an enormous bill if it all goes wrong, and Euroclear CEO Valérie Urbain says using the assets could "disrupt the world's financial order".

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

Belgian Prime Minister Bart de Wever has presented the EU with a series of "rational, reasonable, and justified conditions" before he will accept the reconstruction loan scheme, and he has refused to rule out legal action if it "poses significant risks" for his country.

The Details of the EU's Strategy?

European Union officials is racing against time before next Thursday's summit to come up with a compromise that Belgium can support.

So far the EU has held off touching the assets themselves directly but since last year has directed the "excess income" from them to Ukraine. In 2024 that amounted to €3.7bn. Legally, using the profits is seen as safe as Russia is sanctioned and the returns are not Moscow's sovereign assets.

But global military support for Ukraine has slipped dramatically 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 currently two EU options seeking to supplying Ukraine with €90bn, to pay for a majority of its budgetary necessities.

• One is to borrow the funds on the markets, guaranteed by the EU budget as a surety. This is Belgium's preferred option but it needs a consensus by EU leaders and that would be problematic when two member states oppose funding Ukraine's military.
• This makes the other option providing a loan of Ukraine cash from the Russian assets, which were at first held in financial instruments but have now mostly matured into cash. That funding is owned by Euroclear held in the European Central Bank.

Brussels' executive arm accepts Belgium has justified fears and says it is assured it has resolved them.

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

Should Euroclear suffer a loss 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 enforced in the EU.

As an important step, EU ambassadors are set to approve on Friday to permanently block Russia's central bank assets held in Europe for the foreseeable future.

Previously they have had to vote unanimously every six months to renew 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 remain frozen as long as an "clear risk to the economic interests of the union" continues.

Why Belgium is Still Not Satisfied

Belgium is insistent it remains a strong supporter of Ukraine, but sees regulatory pitfalls in the plan and worries about being forced to deal with the consequences if things fail.

A typically partisan political environment in this case has come together in support of Prime Minister Bart de Wever, who is under pressure from European colleagues.

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

Although the EU might be able to arrange adequate protections for the loan itself, Belgium worries about an further exposure of being exposed to extra fines or liabilities.

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

"Lenders need to comply with stability regulations and shouldn't concentrate risk. Now the EU is instructing Euroclear to do just that.

"Why do we have these financial regulations? It's because we want banks to be secure. And if things go wrong it would become the responsibility of Belgium to bail out Euroclear. That's a further cause why it's so important for Belgium to secure absolute assurances for Euroclear."

Europe Under Pressure from Every Direction

The situation is urgent, caution a group of EU member states including those closest to Russia such as the Baltics, Finland and Poland. They believe the proposal to use Russian funds is "the fiscally viable and practically possible solution".

"It is a decisive moment for us," warns 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".

While Russia is insistent its money should not be accessed, there are further worries among EU officials that the US may want to employ Russia's immobilized billions for another purpose, as part of its own diplomatic proposal.

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

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