Moscow Hits Back at the EU's Scheme to Lend Frozen Russian Funds to Ukraine
Ukraine is facing a severe shortage of cash to maintain its armed forces and economy, after nearly four years of Russia's full-scale war.
In the view of European leaders, the remedy to addressing Kyiv's financial shortfall of €135.7bn for the coming 24 months lies in Moscow's immobilized funds sitting in Belgian bank Euroclear, and European Union officials hope to finalize the plan at their EU leaders' conference next week.
Russian officials caution the EU plan would be an illegal seizure, and the Central Bank of Russia declared on Friday it was suing Euroclear in a Moscow court even before a definitive agreement is made.
'Only Fair' to Utilize Moscow's Funds, Say Ukraine and the EU
In total, Russia has about €210bn of its state reserves blocked in the EU, and €185bn of that is managed by Euroclear.
The EU and Ukraine contend that money should be used to rebuild what Russia has destroyed: Brussels terms it a "reconstruction loan" and has devised a plan to bolster Ukraine's economy amounting to €90bn.
"It's only fair that the assets frozen from Russia should be used to rebuild what Russia has destroyed – and that that capital then becomes Ukraine's," says Ukrainian President Volodymyr Zelensky.
German Chancellor Friedrich Merz states the assets will "allow Ukraine to defend itself effectively against any future Russian attacks".
Moscow's lawsuit was foreseen in Brussels. But it is not just Moscow that is dissatisfied.
Belgium is worried it will be saddled with an huge bill if it all goes wrong, and Euroclear head Valérie Urbain says using the assets could "disrupt the international financial system".
Euroclear also has an estimated €16-17bn immobilised in Russia.
Belgian Prime Minister Bart de Wever has given Brussels a series of "rational, reasonable, and justified conditions" before he will accept the reparations plan, and he has not excluded legal action if it "poses significant risks" for his country.
Explaining the EU's Proposal?
The EU is racing against time prior to next Thursday's summit to finalize a solution that Belgium can support.
Previously the EU has avoided using the assets themselves directly but starting in 2024 has paid the "excess income" from them to Ukraine. In 2024 that was €3.7bn. Juridically, using the interest is deemed safe as Russia is subject to sanctions and the earnings are not property of the Russian state.
But foreign defense assistance for Ukraine has fallen significantly in 2025, and Europe has found it difficult to compensate for the gap caused by the US decision to all but stop funding Ukraine under President Donald Trump.
There are currently two EU proposals seeking to supplying Ukraine with €90bn, to finance a majority of its budgetary necessities.
- The first is to raise the money on financial markets, secured against the EU budget as a surety. This is Belgium's first choice but it needs a unanimous vote by EU leaders and that would be challenging when Hungary and Slovakia oppose funding Ukraine's military.
- This makes the other option lending Ukraine cash from the Russian assets, which were initially held in securities but have now mostly matured into cash. That capital is Euroclear property held in the European Central Bank.
The European Commission recognizes Belgium has legitimate concerns and states it is assured it has dealt with them.
The proposal is for Belgium to be safeguarded with a assurance encompassing 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.
In the event that Russia targeted Belgium itself, any decision by a Russian court would not be enforced in the EU.
In a key development, EU ambassadors are expected to agree on Friday to immobilise Russia's central bank assets held in Europe for the foreseeable future.
Heretofore they have had to vote by consensus every six months to extend the freeze, which could have meant a ongoing risk to Belgium.
The EU ambassadors are expected to use an extraordinary measure under Article 122 of the EU Treaties so the assets remain frozen as long as an "immediate threat to the financial well-being of the union" continues.
The Reasons Belgium is Remains On Board
Brussels is adamant it remains a staunch ally of Ukraine, but perceives juridical dangers in the plan and is concerned about being shouldering the fallout if things go wrong.
A usually partisan political environment in this case has come together in support of Prime Minister Bart de Wever, who is under pressure from other European officials.
"Belgium has a modest-sized economy. Belgian GDP is around €565bn – consider if it would need to shoulder a €185bn bill," says Veerle Colaert, expert in financial law at KU Leuven University.
Although the EU might be able to arrange sufficient protections for the loan itself, Belgium worries about an additional danger of being subject to extra legal costs.
Prof Colaert also believes the requirement for Euroclear to issue credit to the EU would breach EU banking regulations.
"Lenders need to adhere to capital and liquidity requirements and shouldn't make one enormous loan. Now the EU is instructing Euroclear to do exactly that.
"What is the purpose of these financial regulations? It's because we want banks to be secure. And if things turn sour it would become the responsibility of Belgium to bail out Euroclear. That's another reason why it's so important for Belgium to obtain ironclad guarantees for Euroclear."
The European Union Under Pressure from Multiple Fronts
There is no time to lose, warn seven EU member states including those closest to Russia such as the Baltics, Finland and Poland. They argue the scheme involving immobilized capital is "the financially feasible and politically achievable solution".
"This is a crucial test for us," states leading German conservative MP Norbert Röttgen. "If we fail, I don't know what we'll do next. That's why we have to finalize the deal in a week's time".
While Russia is insistent its money should not be touched, 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 stated Ukraine is in discussions with Europe and the US on a reconstruction fund, but he is also cognizant the US has been engaging with Russia about potential collaboration.
An initial document of the US peace plan suggested $100bn of Russia's blocked funds being used by the US for reconstruction, with the US {taking|receiving