Russia Responds at the EU's Proposal to Loan Frozen Russian Funds to Kyiv

Kyiv remains facing a severe shortage of cash to sustain its military and economy, after nearly four years of the ongoing invasion by Moscow.

For Europe, the remedy to filling Ukraine's funding gap of €135.7bn for the following biennium is found in assets belonging to Russia that are frozen held by Belgian bank Euroclear, and EU leaders seek to sign that off at their Brussels summit next week.

Moscow's representatives state the EU plan would be an confiscation, and Moscow's monetary authority stated on Friday it was initiating legal action against Euroclear in a Moscow court prior to a definitive agreement is made.

'Just' to Employ Moscow's Assets, Argue Kyiv and Brussels

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

Brussels and Kyiv argue that money should be used to restore what Russia has laid waste to: EU officials refers to it as a "reconstruction loan" and has devised a plan to prop up Ukraine's economy amounting to €90bn.

"It is only just that Russia's frozen assets should be used to rebuild what Russia has destroyed – and that those funds then becomes ours," states Ukrainian President Volodymyr Zelensky.

Germany's leader Friedrich Merz argues the assets will "help Ukraine to protect itself efficiently against any future Russian attacks".

The legal move by Moscow was foreseen in Brussels. But it is not only Moscow that is concerned.

The Belgian government is concerned it will be burdened by an enormous bill if it all goes wrong, and Euroclear head Valérie Urbain warns using the assets could "disrupt the international financial system".

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

Belgium's PM Bart de Wever has presented the EU with a series of "pragmatic, fair, and legitimate conditions" before he will agree to the reparations plan, and he has not excluded legal action if it "presents significant risks" for his country.

The Details of the EU's Plan?

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

Previously the EU has avoided accessing the frozen capital directly but since last year has paid the "windfall profits" from them to Ukraine. In 2024 that totaled €3.7bn. Legally, using the profits is seen as less risky as Russia is subject to sanctions and the earnings are not Moscow's sovereign assets.

But foreign defense assistance for Ukraine has declined sharply in 2025, and Europe has found it difficult to make up the gap caused by the US decision to virtually halt funding Ukraine under President Donald Trump.

There are presently two EU plans designed to furnishing Ukraine with €90bn, to pay for a majority of its budgetary necessities.

• One is to borrow the funds on capital markets, backed by the EU budget as a surety. This is Belgium's favored solution but it demands a consensus by EU leaders and that would be problematic when Budapest and Bratislava are against funding Ukraine's military.
• The alternative is providing a loan of Ukraine cash from the Moscow's immobilized capital, which were initially held in bonds but have now predominantly turned into cash. That money is an asset of Euroclear 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 scheme is for Belgium to be shielded 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 loss would be compensated from assets belonging to Russia's own settlement agency which are in the EU.

If Russia targeted Belgium itself, any ruling by a Russian court would not be recognized in the EU.

In a key development, EU ambassadors are expected to agree on Friday to freeze indefinitely Russia's central bank assets held in Europe permanently.

Previously 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 set to use an extraordinary measure under Article 122 of the EU Treaties so the assets stay blocked as long as an "direct danger to the financial well-being of the union" continues.

The Reasons Belgium is Not Yet On Board

Belgium is adamant it remains a strong supporter of Ukraine, but identifies juridical dangers in the plan and is concerned about being forced to deal with the repercussions if things fail.

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

"The Belgian economy is not large. Belgian GDP is approximately €565bn – think about if it would need to bear a €185bn bill," says Veerle Colaert, professor of financial law at KU Leuven University.

While the EU might be able to secure sufficient protections for the loan itself, Belgium worries about an further exposure of being vulnerable to extra fines or liabilities.

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

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

"What is the purpose of these bank rules? It's because we want banks to be secure. And if things turn sour it would fall to Belgium to bail out Euroclear. That's an additional reason why it's so important for Belgium to obtain absolute protections for Euroclear."

Europe Under Pressure from All Sides

There is no time to lose, caution seven EU member states including those closest to Russia such as the Baltics, Finland and Poland. They argue the frozen assets plan is "a economically realistic and politically realistic solution".

"It is a decisive moment for us," says leading German conservative MP Norbert Röttgen. "Should we not succeed, I don't know what we'll do afterwards. That's why we have to succeed in a week's time".

While Russia is adamant its money should not be accessed, there are additional apprehensions among European figures that the US may want to employ Russia's blocked funds differently, as part of its own peace plan.

Zelensky has indicated Ukraine is coordinating with Europe and the US on a reconstruction fund, but he is also aware the US has been engaging with Russia about potential collaboration.

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