Russia Responds at Europe's Scheme to Loan Frozen Russian Funds to Kyiv

Ukraine is running out of funding 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 plugging Ukraine's financial shortfall of €135.7bn for the following biennium is found in assets belonging to Russia that are frozen held by Belgian bank Euroclear, and Brussels seek to give it the green light at their meeting in Brussels next week.

Authorities in Russia state the EU plan would be an act of theft, and the Central Bank of Russia announced on Friday it was initiating legal action against Euroclear in a Moscow court ahead of a final decision is made.

'Just' to Use Moscow's Funds, Assert Kyiv and Brussels

In total, Russia has approximately €210bn of its state reserves immobilized in the EU, and €185bn of that is managed by Euroclear.

European and Ukrainian authorities contend that those funds should be used to rebuild what Russia has destroyed: The European Commission terms it a "reconstruction loan" and has come up with a plan to prop up Ukraine's economy to the tune of €90bn.

"It is appropriate that the assets frozen from Russia should be used to reconstruct what Russia has destroyed – and that money then becomes Ukraine's," says Ukraine's Volodymyr Zelensky.

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

Moscow's lawsuit was anticipated in Brussels. But it is not only Moscow that is concerned.

Authorities in Brussels is anxious it will be burdened by an enormous bill if it all fails, and Euroclear CEO Valérie Urbain argues using the assets could "disrupt the world's financial order".

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

Belgium's PM Bart de Wever has given Brussels a series of "logical, sensible, and warranted conditions" before he will accept the reparations plan, and he has refused to rule out legal action if it "presents significant risks" for his country.

What is the EU's Proposal?

European Union officials is racing against time before next Thursday's summit to come up with a solution that Belgium can accept.

Until now the EU has refrained from using the frozen capital directly but starting in 2024 has directed the "extraordinary revenues" from them to Ukraine. In 2024 that was €3.7bn. Legally, using the interest is considered less risky as Russia is sanctioned and the earnings are not property of the Russian state.

But international military aid for Ukraine has slipped dramatically in 2025, and Europe has struggled to cover the deficit resulting from the US decision to virtually halt funding Ukraine under President Donald Trump.

There are presently two EU plans aimed at providing Ukraine with €90bn, to cover two-thirds of its budgetary necessities.

• The first is to raise the money on capital markets, guaranteed by the EU budget as a surety. This is Belgium's preferred option but it requires a agreement by all by EU leaders and that would be challenging when Budapest and Bratislava oppose funding Ukraine's military.
• The alternative is loaning Ukraine cash from the Russian assets, which were initially held in bonds but have now mostly matured into cash. That funding is an asset of Euroclear held in the European Central Bank.

Brussels' executive arm acknowledges Belgium has valid worries and states it is convinced it has addressed them.

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

If Euroclear face a financial hit of its own assets in Russia, the loss would be compensated 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 ruling 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 permanently.

Heretofore they have had to vote all together every six months to continue 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 "immediate threat to the economic interests of the union" continues.

The Reasons Belgium is Not Yet Convinced

The Belgian government is insistent it remains a staunch ally of Ukraine, but sees legal risks in the plan and fears being left to handle the consequences if things do not work out.

A typically divided political landscape in this case has rallied behind Prime Minister Bart de Wever, who is facing pressure from European colleagues.

"Belgium has a modest-sized economy. Belgian GDP is around €565bn – think about if it would need to bear a €185bn bill," comments Veerle Colaert, academic specializing in financial regulation at KU Leuven University.

Although the EU might be able to secure sufficient assurances for the loan itself, Belgium fears an additional danger of being subject to extra legal costs.

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

"Banks need to follow stability regulations and shouldn't concentrate risk. Now the EU is asking Euroclear to do just that.

"Why do we have these bank rules? It's because we want banks to be solvent. And if things fail it would become the responsibility of Belgium to bail out Euroclear. That's an additional reason why it's so crucial for Belgium to obtain absolute protections for Euroclear."

EU Leaders Under Pressure from Every Direction

The situation is urgent, warn several EU member states including those bordering Russia such as the Baltics, Finland and Poland. They maintain the frozen assets plan is "the most financially feasible and practically possible solution".

"This is a crucial test 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 reach an agreement in a week's time".

While Russia is adamant its money should not be used, there are added concerns among leaders in Europe that the US may want to deploy Russia's immobilized billions in another way, as part of its own peace initiative.

Zelensky has said Ukraine is coordinating with Europe and the US on a reconstruction fund, but he is also mindful the US has been engaging with Russia about possible partnership.

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