Russia Retaliates at Europe's Proposal to Loan Frozen Moscow's Cash to Kyiv

Kyiv remains facing a severe shortage of financial resources to sustain its armed forces and economy afloat, after almost four years of full-scale conflict with Russia.

For Europe, the remedy to addressing Kyiv's financial shortfall of €135.7bn for the coming 24 months lies in assets belonging to Russia that are frozen sitting in Belgian bank Euroclear, and European Union officials seek to sign that off at their Brussels summit next week.

Moscow's representatives caution 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 conclusive plan is made.

'Appropriate' to Use Moscow's Funds, Argue European and Ukrainian Officials

All told, Russia has approximately €210bn of its assets blocked in the EU, and €185bn of that is managed by Euroclear.

The EU and Ukraine maintain that those funds should be used to reconstruct what Russia has laid waste to: The European Commission refers to it as a "loan for reparations" and has come up with a plan to support Ukraine's economy valued at €90bn.

"It is only just that Moscow's blocked funds should be used to rebuild what Russia has destroyed – and that money then becomes ours," says Ukrainian President Volodymyr Zelensky.

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

The legal move by Moscow was anticipated in Brussels. But it is not just Moscow that is dissatisfied.

Belgium is concerned it will be burdened by an enormous bill if it all fails, and Euroclear chief executive Valérie Urbain says using the assets could "undermine the international financial system".

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

Belgium's PM Bart de Wever has presented the EU with a series of "pragmatic, fair, and legitimate conditions" before he will endorse the reparations plan, and he has left open the possibility of legal action if it "presents significant risks" for his country.

The Details of the EU's Proposal?

Brussels is under pressure before next Thursday's summit to agree on a solution that Belgium can agree to.

Until now the EU has refrained from touching the assets themselves directly but starting in 2024 has directed the "windfall profits" from them to Ukraine. In 2024 that amounted to €3.7bn. From a legal standpoint, using the profits is deemed less risky as Russia is under sanction and the proceeds 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 left by the US decision to largely cease funding Ukraine under President Donald Trump.

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

• The first is to secure the capital on the markets, backed by the EU budget as a surety. This is Belgium's favored solution but it needs a unanimous vote by EU leaders and that would be difficult when two member states oppose funding Ukraine's military.
• This makes the other option loaning Ukraine cash from the Moscow's immobilized capital, which were initially held in securities but have now predominantly matured into cash. That funding is Euroclear property deposited at the European Central Bank.

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

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

Should Euroclear suffer a loss of its own assets in Russia, that would be offset from assets belonging to Russia's own settlement agency which are in the EU.

If Russia took legal action against Belgium itself, any decision by a Russian court would not be enforced in the EU.

In a significant move, EU ambassadors are expected to agree on Friday to immobilise Russia's central bank assets held in Europe permanently.

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 set to use an extraordinary measure under Article 122 of the EU Treaties so the assets stay blocked as long as an "immediate threat to the economic security of the union" continues.

Why Belgium is Remains Satisfied

Belgium is firm it remains a staunch ally of Ukraine, but identifies regulatory pitfalls in the plan and worries about being forced to deal with the consequences if things do not work out.

A normally partisan political environment in this case has rallied behind Prime Minister Bart de Wever, who is being pressured from fellow EU leaders.

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

Although the EU might be able to secure enough assurances for the loan itself, Belgium is concerned about an further exposure of being vulnerable to extra legal costs.

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

"Lenders need to follow prudential rules and shouldn't put all their eggs in one basket. Now the EU is telling Euroclear to do precisely that.

"Why do we have these financial regulations? It's because we want banks to be stable. And if things turn sour it would become the responsibility of Belgium to rescue Euroclear. That's an additional reason why it's so crucial for Belgium to get absolute assurances for Euroclear."

EU Leaders Under Pressure from Every Direction

The situation is urgent, state a group of EU member states including those bordering Russia such as the Baltics, Finland and Poland. They believe the frozen assets plan is "the economically realistic and politically realistic solution".

"This is a crucial test for us," warns leading German conservative MP Norbert Röttgen. "If we fail, I don't know what we'll do subsequently. That's why we have to reach an agreement in a week's time".

While Russia is unyielding its money should not be used, there are further worries among EU officials that the US may want to deploy Russia's immobilized billions for another purpose, as part of its own peace initiative.

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

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