Moscow Retaliates at the EU's Plan to Lend Frozen Russian Cash to Ukraine

Kyiv remains running out of cash to keep going its military and economy, after close to 48 months of the ongoing invasion by Moscow.

In the view of European leaders, the remedy to addressing Ukraine's budget hole of €135.7bn for the next two years is found in assets belonging to Russia that are frozen sitting in Belgian bank Euroclear, and Brussels aim to finalize the plan at their EU leaders' conference next week.

Authorities in Russia warn the EU plan would be an illegal seizure, and Moscow's monetary authority announced on Friday it was initiating legal action against Euroclear in a Moscow court prior to a final decision is made.

'Only Fair' to Use Moscow's Funds, Assert Ukraine and the EU

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

European and Ukrainian authorities argue that those funds should be used to rebuild what Russia has devastated: Brussels terms it a "reconstruction loan" and has come up with a plan to prop up Ukraine's economy valued at €90bn.

"It's only fair that Russia's frozen assets should be used to reconstruct what Russia has devastated – and that those funds then becomes ours," states Ukraine's Volodymyr Zelensky.

Germany's leader Friedrich Merz argues the assets will "enable Ukraine to defend itself efficiently against subsequent Russian attacks".

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

Authorities in Brussels is concerned it will be saddled with an huge bill if it all goes wrong, and Euroclear chief executive Valérie Urbain argues using the assets could "undermine the world's financial order".

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

The leader of Belgium Bart de Wever has set the EU a series of "rational, reasonable, and justified conditions" before he will accept the reconstruction loan scheme, and he has not excluded legal action if it "poses significant risks" for his country.

Explaining the EU's Strategy?

The EU is working to the wire ahead of next Thursday's summit to finalize a solution that Belgium can support.

Previously the EU has avoided touching the principal funds directly but starting in 2024 has directed the "extraordinary revenues" from them to Ukraine. In 2024 that totaled €3.7bn. Legally, using the profits is seen as safe as Russia is sanctioned and the earnings are not Moscow's sovereign assets.

But foreign defense assistance for Ukraine has declined sharply in 2025, and Europe has struggled to compensate for the shortfall resulting from the US decision to virtually halt funding Ukraine under President Donald Trump.

There are at the moment two EU proposals aimed at supplying Ukraine with €90bn, to cover a majority of its financial requirements.

• The first is to borrow the funds on the markets, secured against the EU budget as a surety. This is Belgium's first choice but it needs a consensus by EU leaders and that would be difficult when Budapest and Bratislava oppose funding Ukraine's military.
• That leaves lending Ukraine cash from the frozen Russian funds, which were at first held in financial instruments but have now mostly turned into cash. That capital is an asset of Euroclear deposited at the European Central Bank.

The EU's executive accepts Belgium has valid worries and claims it is confident it has addressed them.

The scheme is for Belgium to be protected with a insurance applying to all the €210bn of Russian assets in the EU.

Should Euroclear face a financial hit 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.

In the event that Russia took legal action against Belgium itself, any judgment by a Russian court would not be enforced in the EU.

In a key development, EU ambassadors are poised to endorse on Friday to permanently block Russia's central bank assets held in Europe indefinitely.

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 emergency clause under Article 122 of the EU Treaties so the assets continue to be immobilized as long as an "clear risk to the financial well-being of the union" continues.

Why Belgium is Not Yet Satisfied

The Belgian government is firm it remains a committed partner of Ukraine, but identifies juridical dangers in the plan and fears being shouldering the consequences if things do not work out.

A typically fractured political scene in this case has come together in support of Prime Minister Bart de Wever, who is being pressured from fellow EU leaders.

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

While the EU might be able to secure adequate guarantees for the loan itself, Belgium is concerned about an additional danger of being exposed to extra legal costs.

Prof Colaert also argues the demand for Euroclear to issue credit to the EU would contravene EU banking regulations.

"Lenders need to follow prudential rules and shouldn't concentrate risk. Now the EU is telling Euroclear to do precisely that.

"What is the purpose of these financial regulations? It's because we want banks to be secure. And if things turn sour it would become the responsibility of Belgium to rescue Euroclear. That's an additional reason why it's so vital for Belgium to secure absolute assurances for Euroclear."

EU Leaders Facing Strain from Multiple Fronts

There is no time to lose, state seven EU member states including those closest to Russia such as the Baltics, Finland and Poland. They maintain the proposal to use Russian funds is "the most financially feasible and practically possible solution".

"It's a matter of destiny for us," warns leading German conservative MP Norbert Röttgen. "If we fail, I don't know what we'll do next. That's why we have to reach an agreement in a week's time".

While Russia is insistent its money should not be used, there are additional apprehensions among leaders in Europe that the US may want to use Russia's immobilized billions for another purpose, as part of its own peace plan.

Zelensky has stated Ukraine is working with Europe and the US on a rebuilding fund, but he is also aware the US has been engaging with 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