Moscow Retaliates at Europe's Proposal to Lend Immobilized Moscow's Funds to Ukraine

Ukraine is facing a severe shortage of funding to sustain its military and economy, after close to 48 months of Russia's full-scale war.

For Europe, the answer to addressing Ukraine's funding gap of €135.7bn for the following biennium lies in assets belonging to Russia that are frozen located within Belgian bank Euroclear, and EU leaders hope to give it the green light at their EU leaders' conference next week.

Moscow's representatives caution the EU plan would be an illegal seizure, and the Central Bank of Russia declared on Friday it was taking to court Euroclear in a Moscow court ahead of a final decision is made.

'Appropriate' to Use Moscow's Assets, Argue Kyiv and Brussels

In total, Russia has approximately €210bn of its assets frozen in the EU, and €185bn of that is in the custody of Euroclear.

European and Ukrainian authorities maintain that that capital should be used to reconstruct what Russia has laid waste to: Brussels calls it a "loan for reparations" and has devised a plan to prop up Ukraine's economy valued at €90bn.

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

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

The legal move by Moscow was foreseen in Brussels. But it is not only Moscow that is dissatisfied.

The Belgian government is concerned it will be burdened by an enormous bill if it all fails, and Euroclear head 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 presented the EU with a series of "pragmatic, fair, and legitimate conditions" before he will agree to the reparations plan, and he has refused to rule out legal action if it "presents significant risks" for his country.

Explaining the EU's Plan?

Brussels is working to the wire prior to next Thursday's summit to finalize a arrangement that Belgium can support.

Until now the EU has avoided touching the assets themselves directly but starting in 2024 has transferred the "excess income" from them to Ukraine. In 2024 that was €3.7bn. Legally, using the profits is deemed less risky as Russia is under sanction and the returns are not Moscow's sovereign assets.

But global military support for Ukraine has slipped dramatically in 2025, and Europe has found it difficult to make up the gap resulting from the US decision to largely cease funding Ukraine under President Donald Trump.

There are currently two EU options designed to providing Ukraine with €90bn, to pay for a majority of its funding needs.

• The first is to secure the capital on the markets, secured against 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 difficult when two member states are against funding Ukraine's military.
• The alternative is loaning Ukraine cash from the frozen Russian funds, which were originally held in securities but have now predominantly turned into cash. That capital is owned by Euroclear deposited at the European Central Bank.

Brussels' executive arm recognizes Belgium has valid worries and claims it is assured it has resolved them.

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

If Euroclear incur losses of its own assets in Russia, the shortfall would be covered from assets belonging to Russia's own settlement agency which are in the EU.

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

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

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

The EU ambassadors are planning to use an emergency clause under Article 122 of the EU Treaties so the assets continue to be immobilized as long as an "clear risk to the economic interests of the union" continues.

Why Belgium is Remains Satisfied

Brussels is firm it remains a committed partner of Ukraine, but identifies regulatory pitfalls in the plan and is concerned about being left to handle the fallout if things go wrong.

A normally partisan political environment in this case has united behind Prime Minister Bart de Wever, who is under pressure from fellow EU leaders.

"The Belgian economy is not large. Belgian GDP is about €565bn – consider if it would need to shoulder a €185bn bill," notes 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 fears an further exposure of being exposed to extra legal costs.

Prof Colaert also believes the demand for Euroclear to provide a loan to the EU would breach EU banking regulations.

"Lenders need to adhere to capital and liquidity requirements and shouldn't put all their eggs in one basket. Now the EU is asking Euroclear to do just that.

"What is the purpose of these banking laws? It's because we want banks to be stable. And if things fail it would fall to Belgium to rescue Euroclear. That's a further cause why it's so crucial for Belgium to secure absolute guarantees for Euroclear."

EU Leaders Facing Strain from Every Direction

There is no time to lose, caution a group of EU member states including those bordering Russia such as the Baltics, Finland and Poland. They argue the scheme involving immobilized capital is "a financially feasible 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 succeed 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 deploy Russia's immobilized billions in another way, as part of its own peace plan.

Zelensky has said Ukraine is working with Europe and the US on a recovery fund, but he is also cognizant the US has been talking to 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