Moscow Retaliates at the EU's Scheme to Loan Frozen Russian Funds to Ukraine

Ukraine is facing a severe shortage of funding to keep going its armed forces and economy, after nearly four years of Russia's full-scale war.

For Europe, the remedy to filling Ukraine's funding gap of €135.7bn for the coming 24 months lies in Moscow's immobilized funds located within Belgian bank Euroclear, and EU leaders seek to sign that off at their Brussels summit next week.

Moscow's representatives state the EU plan would be an illegal seizure, and the Central Bank of Russia announced on Friday it was suing Euroclear in a Moscow court even before a final decision is made.

'Only Fair' to Use Moscow's Funds, Argue European and Ukrainian Officials

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

The EU and Ukraine maintain that those funds should be used to reconstruct what Russia has devastated: The European Commission calls it a "reconstruction loan" and has come up with a plan to support Ukraine's economy to the tune of €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," says Ukrainian President Volodymyr Zelensky.

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

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

The Belgian government is anxious it will be burdened by an huge bill if it all backfires, and Euroclear CEO Valérie Urbain warns using the assets could "destabilise the international financial system".

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

Belgian Prime Minister 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 "poses significant risks" for his country.

The Details of the EU's Plan?

European Union officials is under pressure ahead of next Thursday's summit to finalize a arrangement that Belgium can accept.

So far the EU has held off touching the assets themselves directly but for the past year has transferred the "excess income" from them to Ukraine. In 2024 that totaled €3.7bn. Juridically, using the interest is considered less risky as Russia is under sanction and the proceeds are not Russian sovereign property.

But global military support for Ukraine has fallen significantly in 2025, and Europe has struggled to make up the shortfall left by the US decision to all but stop funding Ukraine under President Donald Trump.

There are presently two EU proposals designed to supplying Ukraine with €90bn, to finance a majority of its funding needs.

• One is to secure the capital on capital markets, secured against the EU budget as a collateral. This is Belgium's favored solution but it requires a consensus by EU leaders and that would be difficult when two member states oppose funding Ukraine's military.
• The alternative is lending Ukraine cash from the Russian assets, which were at first held in bonds but have now predominantly matured into cash. That capital is owned by Euroclear held in the European Central Bank.

The European Commission accepts Belgium has valid worries and says it is confident it has dealt with them.

The plan is for Belgium to be protected with a insurance encompassing 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 settlement agency which are in the EU.

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

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

Previously they have had to vote all together every six months to extend the freeze, which could have meant a constant 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 financial well-being of the union" continues.

The Reasons Belgium is Still Not On Board

The Belgian government is firm it remains a committed partner of Ukraine, but identifies regulatory pitfalls in the plan and is concerned about being shouldering the consequences if things go wrong.

A typically 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.

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

Although the EU might be able to obtain enough protections for the loan itself, Belgium worries about an additional danger of being subject to extra damages or penalties.

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

"Banks need to comply with capital and liquidity requirements and shouldn't put all their eggs in one basket. Now the EU is asking 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 bail out Euroclear. That's an additional reason why it's so important for Belgium to get water-tight protections for Euroclear."

EU Leaders Under Pressure from Every Direction

Time is of the essence, state seven EU member states including those bordering Russia such as the Baltics, Finland and Poland. They maintain the frozen assets plan is "the financially feasible and politically achievable solution".

"It's a matter of destiny for us," states leading German conservative MP Norbert Röttgen. "If we fail, I don't know what we'll do subsequently. That's why we have to succeed in a week's time".

Although Russia is adamant its money should not be touched, there are additional apprehensions among European figures that the US may want to deploy Russia's immobilized billions in another way, as part of its own peace initiative.

Zelensky has indicated Ukraine is working with Europe and the US on a recovery fund, but he is also mindful the US has been engaging with Russia about future co-operation.

A preliminary version of the US peace plan mentioned $100bn of Russia's immobilized capital being used by the US for reconstruction, with the US {taking|receiving