Moscow Retaliates at the EU's Proposal to Lend Immobilized Russian Funds to Kyiv

Kyiv remains running out of funding to maintain its armed forces and economy afloat, after almost four years of full-scale conflict with Russia.

From the EU's perspective, the solution to addressing Kyiv's funding gap of €135.7bn for the following biennium rests with Moscow's immobilized funds held by Belgian bank Euroclear, and EU leaders aim to give it the green light at their Brussels summit next week.

Moscow's representatives warn the EU plan would be an act of theft, and Russia's central bank declared on Friday it was taking to court Euroclear in a Moscow court ahead of a final decision is made.

'Just' to Employ Russia's Funds, Argue European and Ukrainian Officials

Overall, Russia has about €210bn of its assets immobilized in the EU, and €185bn of that is held by Euroclear.

European and Ukrainian authorities maintain that those funds should be used to reconstruct what Russia has laid waste to: The European Commission terms it a "reparations loan" and has devised a plan to bolster Ukraine's economy amounting to €90bn.

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

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

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

Belgium is concerned it will be left with an enormous bill if it all goes wrong, and Euroclear head Valérie Urbain argues using the assets could "destabilise the world's financial order".

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

The leader of Belgium Bart de Wever has given Brussels a series of "pragmatic, fair, and legitimate conditions" before he will agree to the reconstruction loan scheme, and he has not excluded legal action if it "poses significant risks" for his country.

What is the EU's Proposal?

Brussels is working to the wire ahead of next Thursday's summit to come up with a compromise that Belgium can agree to.

Previously the EU has avoided accessing the principal funds directly but for the past year has directed the "windfall profits" from them to Ukraine. In 2024 that totaled €3.7bn. From a legal standpoint, using the revenue is deemed less risky as Russia is under sanction and the proceeds are not property of the Russian state.

But global military support for Ukraine has declined sharply in 2025, and Europe has struggled to cover the deficit left by the US decision to virtually halt funding Ukraine under President Donald Trump.

There are presently two EU plans seeking to furnishing Ukraine with €90bn, to pay for a majority of its funding needs.

• One is to borrow the funds on financial markets, backed by the EU budget as a surety. This is Belgium's first choice but it requires a consensus by EU leaders and that would be difficult when two member states oppose funding Ukraine's military.
• The alternative is loaning Ukraine cash from the Russian assets, which were originally held in securities but have now largely been converted into cash. That money is Euroclear property deposited at the European Central Bank.

Brussels' executive arm accepts Belgium has justified fears and says it is convinced it has resolved them.

The plan 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 settlement agency which are in the EU.

Should Russia took legal action against Belgium itself, any judgment by a Russian court would not be accepted 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 by consensus every six months to continue the freeze, which could have meant a repeated risk to Belgium.

The EU ambassadors are set to use an special provision under Article 122 of the EU Treaties so the assets remain frozen as long as an "immediate threat to the economic interests of the union" continues.

The Reasons Belgium is Still Not Satisfied

Belgium is firm it remains a committed partner of Ukraine, but perceives legal risks in the plan and fears being shouldering the repercussions if things do not work out.

A usually divided political landscape in this case has come together in support of Prime Minister Bart de Wever, who is facing pressure from European colleagues.

"Belgium is a small economy. Belgian GDP is around €565bn – consider if it would need to carry a €185bn bill," comments Veerle Colaert, professor of financial law at KU Leuven University.

Although the EU might be able to arrange sufficient guarantees for the loan itself, Belgium is concerned about an additional danger of being vulnerable to extra fines or liabilities.

Prof Colaert also contends the requirement for Euroclear to provide a loan to the EU would contravene EU banking regulations.

"Financial institutions need to comply with prudential rules and shouldn't concentrate risk. Now the EU is telling Euroclear to do exactly that.

"What is the purpose of these bank rules? It's because we want banks to be secure. And if things fail it would be up to Belgium to bail out Euroclear. That's another reason why it's so vital for Belgium to get absolute assurances for Euroclear."

Europe Under Pressure from Multiple Fronts

Time is of the essence, state seven EU member states including those bordering Russia such as the Baltics, Finland and Poland. They argue the scheme involving immobilized capital is "a fiscally viable and politically realistic solution".

"It's a matter of destiny for us," says 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 unyielding its money should not be accessed, there are further worries among leaders in Europe that the US may want to deploy Russia's blocked funds for another purpose, as part of its own peace plan.

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

A preliminary version of the US peace plan suggested $100bn of Russia's frozen assets being used by the US for reconstruction, with the US {taking|receiving