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

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

For Europe, the solution to plugging Ukraine's funding gap of €135.7bn for the following biennium rests with frozen Russian assets located within Belgian bank Euroclear, and Brussels hope to sign that off at their EU leaders' conference next week.

Russian officials state the EU plan would be an illegal seizure, and Russia's central bank announced on Friday it was initiating legal action against Euroclear in a Moscow court prior to a definitive agreement is made.

'Appropriate' to Use Russia's Funds, Say Kyiv and Brussels

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

European and Ukrainian authorities contend that money should be used to restore what Russia has laid waste to: The European Commission refers to it as a "loan for reparations" and has proposed a plan to support Ukraine's economy valued at €90bn.

"It's only fair that Moscow's blocked funds should be used to rebuild what Russia has devastated – and that that capital then becomes Ukraine's," states Ukrainian President Volodymyr Zelensky.

Germany's leader Friedrich Merz says the assets will "allow Ukraine to shield itself effectively against subsequent Russian attacks".

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

Authorities in Brussels is anxious it will be left with an huge bill if it all backfires, and Euroclear chief executive Valérie Urbain warns using the assets could "destabilise the world's financial order".

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

The leader of Belgium Bart de Wever has presented the EU with a series of "pragmatic, fair, and legitimate conditions" before he will accept the reparations plan, 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?

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

So far the EU has avoided using the assets themselves directly but for the past year has paid the "windfall profits" from them to Ukraine. In 2024 that amounted to €3.7bn. From a legal standpoint, using the profits is seen as permissible as Russia is sanctioned and the returns are not Russian sovereign property.

But foreign defense assistance for Ukraine has slipped dramatically in 2025, and Europe has struggled to make up the deficit caused by the US decision to all but stop funding Ukraine under President Donald Trump.

There are presently two EU plans seeking to supplying Ukraine with €90bn, to cover two-thirds of its financial requirements.

• The first is to secure the capital on financial markets, backed by the EU budget as a collateral. This is Belgium's first choice but it demands a agreement by all by EU leaders and that would be problematic when Budapest and Bratislava object to funding Ukraine's military.
• The alternative is providing a loan of Ukraine cash from the Moscow's immobilized capital, which were at first held in financial instruments but have now predominantly matured into cash. That funding is owned by Euroclear deposited at the European Central Bank.

The EU's executive accepts Belgium has valid worries and states it is convinced it has addressed them.

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

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

In the event that Russia took legal action against Belgium itself, any judgment by a Russian court would not be enforced in the EU.

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

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

The EU ambassadors are set to use an special provision under Article 122 of the EU Treaties so the assets continue to be immobilized as long as an "immediate threat to the economic security of the union" continues.

Why Belgium is Remains Convinced

The Belgian government is insistent it remains a strong supporter of Ukraine, but identifies 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 united behind Prime Minister Bart de Wever, who is facing pressure from fellow EU leaders.

"The Belgian economy is not large. Belgian GDP is around €565bn – imagine if it would need to carry a €185bn bill," says Veerle Colaert, expert in financial law at KU Leuven University.

While the EU might be able to arrange adequate protections for the loan itself, Belgium is concerned about an additional danger of being vulnerable to extra legal costs.

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

"Financial institutions need to comply with capital and liquidity requirements and shouldn't make one enormous loan. Now the EU is telling Euroclear to do precisely that.

"What is the purpose of these bank rules? It's because we want banks to be solvent. And if things turn sour it would fall to Belgium to bail out Euroclear. That's a further cause why it's so vital for Belgium to secure ironclad protections for Euroclear."

EU Leaders Under Pressure from Multiple Fronts

There is no time to lose, caution several EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They maintain the proposal to use Russian funds is "a financially feasible and politically achievable solution".

"It is a decisive moment for us," says leading German conservative MP Norbert Röttgen. "If the plan collapses, I don't know what we'll do next. That's why we have to reach an agreement in a week's time".

While Russia is unyielding its money should not be used, there are added concerns among leaders in Europe that the US may want to employ Russia's immobilized billions differently, as part of its own peace plan.

Zelensky has indicated Ukraine is in discussions with Europe and the US on a recovery fund, but he is also aware the US has been talking to Russia about future co-operation.

An initial document of the US peace plan referred to $100bn of Russia's immobilized capital being used by the US for reconstruction, with the US {taking|receiving