Russia Retaliates at Europe's Proposal to Lend Frozen Russian Cash to Kyiv

Kyiv remains facing a severe shortage of funding to keep going its military and economy afloat, after close to 48 months of full-scale conflict with Russia.

From the EU's perspective, the answer to filling Kyiv's budget hole of €135.7bn for the following biennium rests with Moscow's immobilized funds located within Belgian bank Euroclear, and European Union officials seek to sign that off at their Brussels summit next week.

Moscow's representatives state the EU plan would be an act of theft, and the Central Bank of Russia declared on Friday it was initiating legal action against Euroclear in a Moscow court even before a definitive agreement is made.

'Only Fair' to Use Russia's Assets, Argue Kyiv and Brussels

In total, Russia has roughly €210bn of its funds immobilized in the EU, and €185bn of that is held by Euroclear.

European and Ukrainian authorities maintain that those funds should be used to restore what Russia has devastated: Brussels calls it a "reconstruction loan" and has come up with a plan to support Ukraine's economy to the tune of €90bn.

"It is appropriate that Moscow's blocked funds should be used to rebuild what Russia has devastated – and that money then becomes ours," says Ukraine's Volodymyr Zelensky.

German Chancellor Friedrich Merz says the assets will "help Ukraine to protect itself effectively against subsequent Russian attacks".

The legal move by Moscow was foreseen in Brussels. But it is not just Moscow that is unhappy.

The Belgian government is worried it will be burdened by an enormous bill if it all goes wrong, and Euroclear head Valérie Urbain argues using the assets could "destabilise the international financial system".

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

Belgium's PM Bart de Wever has presented the EU with a series of "logical, sensible, and warranted 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?

The EU is racing against time before next Thursday's summit to agree on a arrangement that Belgium can agree to.

Until now the EU has avoided using the assets themselves directly but starting in 2024 has paid the "windfall profits" from them to Ukraine. In 2024 that was €3.7bn. From a legal standpoint, using the interest is deemed safe as Russia is subject to sanctions and the earnings are not Russian sovereign property.

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

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

• Option one is to secure the capital on the markets, backed by the EU budget as a guarantee. This is Belgium's first choice but it needs a consensus by EU leaders and that would be problematic when two member states oppose funding Ukraine's military.
• That leaves lending Ukraine cash from the Moscow's immobilized capital, which were originally held in bonds but have now mostly turned into cash. That money is Euroclear property deposited at the European Central Bank.

The European Commission acknowledges Belgium has valid worries and states it is convinced it has resolved them.

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

Should Euroclear suffer a loss 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.

Should Russia went after Belgium itself, any ruling by a Russian court would not be accepted in the EU.

In a key development, EU ambassadors are poised to endorse on Friday to freeze indefinitely 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 ongoing risk to Belgium.

The EU ambassadors are expected to use an emergency clause under Article 122 of the EU Treaties so the assets stay blocked as long as an "clear risk to the economic interests of the union" continues.

Why Belgium is Still Not Satisfied

Brussels is insistent it remains a strong supporter of Ukraine, but identifies legal risks in the plan and worries about being forced to deal with the fallout if things do not work out.

A usually fractured political scene 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 – imagine if it would need to carry a €185bn bill," comments Veerle Colaert, professor of financial law at KU Leuven University.

While the EU might be able to obtain enough protections for the loan itself, Belgium is concerned about an further exposure of being vulnerable to extra fines or liabilities.

Prof Colaert also believes the stipulation for Euroclear to issue credit to the EU would violate EU banking regulations.

"Financial institutions need to follow stability regulations and shouldn't put all their eggs in one basket. Now the EU is asking 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 go wrong it would fall to Belgium to save Euroclear. That's a further cause why it's so important for Belgium to obtain ironclad assurances for Euroclear."

Europe Facing Strain from Multiple Fronts

Time is of the essence, caution a group of EU member states including those bordering Russia such as the Baltics, Finland and Poland. They maintain the frozen assets plan is "the fiscally viable and politically realistic solution".

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

Although Russia is unyielding its money should not be accessed, there are further worries among leaders in Europe that the US may want to employ Russia's immobilized billions in another way, as part of its own diplomatic proposal.

Zelensky has stated Ukraine is coordinating with Europe and the US on a recovery fund, but he is also mindful the US has been talking to Russia about future co-operation.

An initial document of the US peace plan mentioned $100bn of Russia's frozen assets being used by the US for reconstruction, with the US {taking|receiving