Russia Retaliates at Europe's Proposal to Loan Immobilized Russian Cash to Ukraine

Kyiv remains facing a severe shortage of funding 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 solution to addressing Kyiv's funding gap of €135.7bn for the next two years rests with assets belonging to Russia that are frozen held by Belgian bank Euroclear, and EU leaders seek to give it the green light at their EU leaders' conference next week.

Russian officials caution the EU plan would be an act of theft, and Russia's central bank declared on Friday it was initiating legal action against Euroclear in a Moscow court prior to a conclusive plan is made.

'Appropriate' to Utilize Russia's Assets, Argue Kyiv and Brussels

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

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

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

Chancellor Friedrich Merz argues the assets will "allow Ukraine to shield itself efficiently against any future Russian attacks".

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

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

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

Belgian Prime Minister Bart de Wever has set the EU a series of "rational, reasonable, and justified conditions" before he will agree to the reparations plan, and he has refused to rule out legal action if it "poses significant risks" for his country.

What is the EU's Proposal?

European Union officials is working to the wire before next Thursday's summit to agree on a solution that Belgium can accept.

Until now the EU has avoided using the principal funds directly but starting in 2024 has transferred the "windfall profits" from them to Ukraine. In 2024 that totaled €3.7bn. Legally, using the profits is considered permissible as Russia is under sanction and the earnings are not Moscow's sovereign assets.

But international military aid for Ukraine has fallen significantly in 2025, and Europe has had trouble trying to compensate for the gap left by the US decision to all but stop funding Ukraine under President Donald Trump.

There are currently two EU options designed to providing Ukraine with €90bn, to pay for a large portion of its budgetary necessities.

• Option one is to raise the money on the markets, guaranteed by the EU budget as a guarantee. This is Belgium's favored solution but it requires a consensus by EU leaders and that would be challenging when two member states object to funding Ukraine's military.
• The alternative is providing a loan of Ukraine cash from the Russian assets, which were initially held in securities but have now largely been converted into cash. That capital is owned by Euroclear held in the European Central Bank.

The European Commission recognizes Belgium has justified fears and says it is confident it has dealt with them.

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

If 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 went after Belgium itself, any judgment by a Russian court would not be enforced in the EU.

As an important step, EU ambassadors are set to approve on Friday to immobilise Russia's central bank assets held in Europe indefinitely.

Previously they have had to vote all together every six months to extend the freeze, which could have meant a constant risk to Belgium.

The EU ambassadors are set to use an emergency clause 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 Not Yet Satisfied

Brussels is adamant it remains a committed partner of Ukraine, but perceives juridical dangers in the plan and fears being forced to deal with the fallout if things fail.

A usually divided political landscape in this case has rallied behind Prime Minister Bart de Wever, who is facing pressure from European colleagues.

"Belgium has a modest-sized economy. Belgian GDP is about €565bn – imagine if it would need to bear a €185bn bill," notes Veerle Colaert, expert in financial law at KU Leuven University.

While the EU might be able to obtain adequate guarantees for the loan itself, Belgium worries about an added risk of being vulnerable to extra damages or penalties.

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

"Banks need to adhere to capital and liquidity requirements and shouldn't make one enormous loan. Now the EU is asking Euroclear to do exactly that.

"Why do we have these banking laws? 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 a further cause why it's so crucial for Belgium to obtain absolute protections for Euroclear."

The European Union In a Difficult Position from Multiple Fronts

Time is of the essence, caution seven EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They maintain the frozen assets plan is "the most financially feasible and politically realistic solution".

"It is a decisive moment for us," states leading German conservative MP Norbert Röttgen. "If we fail, I don't know what we'll do afterwards. 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 additional apprehensions among leaders in Europe that the US may want to use Russia's blocked funds for another purpose, as part of its own peace initiative.

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

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