Russia Retaliates at the EU's Scheme to Loan Frozen Russian Assets to Kyiv

Ukraine is running out of funding to maintain its military and economy, after close to 48 months of the ongoing invasion by Moscow.

In the view of European leaders, the answer to plugging Ukraine's funding gap of €135.7bn for the coming 24 months rests with Moscow's immobilized funds located within Belgian bank Euroclear, and Brussels hope to sign that off at their meeting in Brussels next week.

Authorities in Russia state the EU plan would be an confiscation, and the Central Bank of Russia stated on Friday it was initiating legal action against Euroclear in a Moscow court prior to a definitive agreement is made.

'Only Fair' to Use Moscow's Funds, Assert Kyiv and Brussels

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

Brussels and Kyiv maintain that that capital should be used to restore what Russia has destroyed: Brussels refers to it as a "reconstruction loan" and has come up with a plan to support 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," remarks Ukrainian President Volodymyr Zelensky.

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

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

Belgium is worried it will be saddled with an huge bill if it all backfires, and Euroclear head Valérie Urbain warns using the assets could "undermine the international financial system".

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

The leader of Belgium Bart de Wever has set the EU a series of "logical, sensible, and warranted conditions" before he will endorse the reconstruction loan scheme, and he has refused to rule out legal action if it "poses significant risks" for his country.

What is the EU's Strategy?

The EU is working to the wire before next Thursday's summit to agree on a compromise that Belgium can accept.

Until now the EU has refrained from touching the assets themselves directly but for the past year has directed the "excess income" from them to Ukraine. In 2024 that was €3.7bn. From a legal standpoint, using the profits is deemed permissible as Russia is subject to sanctions and the returns are not Russian sovereign property.

But international military aid for Ukraine has fallen significantly in 2025, and Europe has found it difficult to compensate for the gap 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.

• One is to secure the capital on the markets, guaranteed by the EU budget as a guarantee. This is Belgium's favored solution but it requires a unanimous vote by EU leaders and that would be problematic when two member states object to 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 funding is Euroclear property located within the European Central Bank.

Brussels' executive arm recognizes Belgium has legitimate concerns and says it is confident it has addressed them.

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

If Euroclear suffer a loss of its own assets in Russia, that would be offset 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 accepted in the EU.

In a key development, EU ambassadors are set to approve on Friday to immobilise Russia's central bank assets held in Europe permanently.

Heretofore they have had to vote unanimously every six months to renew the freeze, which could have meant a ongoing risk to Belgium.

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

The Reasons Belgium is Still Not Convinced

Belgium is adamant it remains a strong supporter of Ukraine, but identifies regulatory pitfalls in the plan and worries about being shouldering the consequences if things do not work out.

A typically divided political landscape in this case has come together in support of Prime Minister Bart de Wever, who is being pressured from other European officials.

"The Belgian economy is not large. Belgian GDP is around €565bn – consider if it would need to shoulder a €185bn bill," says Veerle Colaert, academic specializing in financial regulation at KU Leuven University.

While the EU might be able to secure sufficient guarantees for the loan itself, Belgium fears an added risk of being vulnerable to extra fines or liabilities.

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

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

"What is the purpose of these banking laws? It's because we want banks to be solvent. And if things turn sour it would be up to Belgium to bail out Euroclear. That's an additional reason why it's so vital for Belgium to get water-tight protections for Euroclear."

EU Leaders Under Pressure from Every Direction

Time is of the essence, warn seven EU member states including those bordering Russia such as the Baltics, Finland and Poland. They believe the proposal to use Russian funds is "the financially feasible and practically possible solution".

"It is a decisive moment 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 finalize the deal in a week's time".

Although Russia is insistent its money should not be touched, there are additional apprehensions among European figures that the US may want to deploy Russia's blocked funds for another purpose, as part of its own peace initiative.

Zelensky has stated Ukraine is working with Europe and the US on a recovery fund, but he is also mindful the US has been talking to Russia about possible partnership.

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