Moscow Hits Back at the EU's Proposal to Lend Immobilized Russian Cash to Kyiv

Kyiv remains running out of financial resources to keep going its armed forces and economy, after almost four years of Russia's full-scale war.

From the EU's perspective, the answer to addressing Kyiv's financial shortfall of €135.7bn for the following biennium lies in frozen Russian assets located within Belgian bank Euroclear, and European Union officials hope to finalize the plan at their meeting in Brussels next week.

Moscow's representatives state 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 even before a final decision is made.

'Appropriate' to Use Russia's Assets, Assert European and Ukrainian Officials

Overall, Russia has approximately €210bn of its state reserves blocked in the EU, and €185bn of that is in the custody of Euroclear.

The EU and Ukraine argue that those funds should be used to reconstruct what Russia has devastated: EU officials terms it a "reparations loan" and has come up with a plan to support Ukraine's economy valued at €90bn.

"It's only fair that the assets frozen from Russia should be used to rebuild what Russia has destroyed – and that that capital then becomes Ukraine's," says Ukrainian President Volodymyr Zelensky.

Chancellor Friedrich Merz argues the assets will "help Ukraine to protect itself successfully against any future Russian attacks".

Moscow's lawsuit was foreseen in Brussels. But it is not only Moscow that is dissatisfied.

The Belgian government is worried it will be burdened by an enormous bill if it all backfires, and Euroclear CEO Valérie Urbain says using the assets could "undermine the international financial system".

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

Belgian Prime Minister Bart de Wever has presented the EU with a series of "rational, reasonable, and justified conditions" before he will agree to the reconstruction loan scheme, and he has left open the possibility of legal action if it "poses significant risks" for his country.

Explaining the EU's Plan?

The EU is racing against time before next Thursday's summit to agree on a arrangement that Belgium can agree to.

So far the EU has refrained from using the principal funds directly but since last year has paid the "excess income" from them to Ukraine. In 2024 that amounted to €3.7bn. Legally, using the profits is considered permissible as Russia is under sanction and the returns are not property of the Russian state.

But international military aid for Ukraine has fallen significantly in 2025, and Europe has struggled to compensate for the deficit caused by the US decision to virtually halt funding Ukraine under President Donald Trump.

There are presently two EU proposals seeking to supplying Ukraine with €90bn, to cover a large portion of its budgetary necessities.

• One is to raise the money on financial markets, secured against the EU budget as a guarantee. This is Belgium's first choice but it requires a unanimous vote by EU leaders and that would be challenging when Budapest and Bratislava object to funding Ukraine's military.
• That leaves lending Ukraine cash from the frozen Russian funds, which were originally held in bonds but have now mostly been converted into cash. That funding is an asset of Euroclear deposited at the European Central Bank.

The EU's executive acknowledges Belgium has justified fears and claims it is assured it has addressed them.

The scheme is for Belgium to be protected with a guarantee 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 decision by a Russian court would not be accepted 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 for the foreseeable future.

Heretofore they have had to vote by consensus every six months to renew 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 remain frozen as long as an "clear risk to the financial well-being of the union" continues.

Why Belgium is Still Not Convinced

The Belgian government is insistent it remains a strong supporter of Ukraine, but perceives legal risks in the plan and is concerned about being shouldering the repercussions if things do not work out.

A normally fractured political scene in this case has rallied behind Prime Minister Bart de Wever, who is facing pressure from European colleagues.

"Belgium is a small economy. Belgian GDP is approximately €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 obtain sufficient assurances for the loan itself, Belgium worries about an added risk of being subject to extra fines or liabilities.

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

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

"What is the purpose of these bank rules? It's because we want banks to be secure. And if things fail it would fall to Belgium to rescue Euroclear. That's an additional reason why it's so important for Belgium to secure water-tight guarantees for Euroclear."

EU Leaders In a Difficult Position from Multiple Fronts

Time is of the essence, caution a group of EU member states including those bordering Russia such as the Baltics, Finland and Poland. They argue the proposal to use Russian funds is "a economically realistic and politically realistic solution".

"It is a decisive moment for us," says leading German conservative MP Norbert Röttgen. "If we fail, I don't know what we'll do subsequently. That's why we have to finalize the deal in a week's time".

While Russia is adamant its money should not be accessed, there are further worries among EU officials that the US may want to use Russia's frozen billions for another purpose, as part of its own diplomatic proposal.

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

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