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

Kyiv remains facing a severe shortage of funding to maintain its military and economy afloat, after close to 48 months of full-scale conflict with Russia.

For Europe, the remedy to addressing Kyiv's budget hole of €135.7bn for the following biennium rests with Moscow's immobilized funds located within Belgian bank Euroclear, and Brussels seek to give it the green light at their meeting in Brussels next week.

Russian officials caution the EU plan would be an confiscation, and the Central Bank of Russia declared on Friday it was suing Euroclear in a Moscow court even before a conclusive plan is made.

'Only Fair' to Use Russia's Assets, Argue 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.

European and Ukrainian authorities maintain that money should be used to restore what Russia has devastated: EU officials refers to it as a "reconstruction loan" and has devised a plan to support Ukraine's economy valued at €90bn.

"It is only just that Moscow's blocked funds should be used to reconstruct what Russia has devastated – and that money then becomes ours," remarks Ukraine's Volodymyr Zelensky.

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

The legal move by Moscow was expected in Brussels. But it is not just Moscow that is unhappy.

The Belgian government is concerned it will be left with an massive bill if it all fails, and Euroclear head Valérie Urbain argues using the assets could "undermine the world's financial order".

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

The leader of Belgium Bart de Wever has set the EU 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 "carries significant risks" for his country.

Explaining the EU's Proposal?

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

Previously the EU has avoided accessing the principal funds directly but since last year has directed the "excess income" from them to Ukraine. In 2024 that was €3.7bn. From a legal standpoint, using the interest is deemed permissible as Russia is subject to sanctions and the proceeds are not Moscow's sovereign assets.

But global military support for Ukraine has declined sharply 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 presently two EU plans aimed at providing Ukraine with €90bn, to pay for a majority of its financial requirements.

• Option one is to raise the money on the markets, guaranteed by the EU budget as a surety. This is Belgium's first choice but it requires 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 initially held in bonds but have now predominantly turned into cash. That funding is an asset of Euroclear located within the European Central Bank.

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

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

Should Euroclear incur losses 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 ruling by a Russian court would not be accepted in the EU.

In a significant move, EU ambassadors are poised to endorse on Friday to freeze indefinitely Russia's central bank assets held in Europe for the foreseeable future.

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 emergency clause under Article 122 of the EU Treaties so the assets remain frozen as long as an "direct danger to the financial well-being of the union" continues.

Why Belgium is Still Not Satisfied

Belgium is insistent it remains a strong supporter of Ukraine, but identifies juridical dangers in the plan and worries about being shouldering the fallout if things fail.

A typically partisan political environment in this case has rallied behind Prime Minister Bart de Wever, who is being pressured from European colleagues.

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

Although the EU might be able to obtain adequate protections for the loan itself, Belgium fears an additional danger of being vulnerable to extra fines or liabilities.

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

"Financial institutions need to comply with capital and liquidity requirements and shouldn't concentrate risk. Now the EU is instructing Euroclear to do just that.

"Why do we have these banking laws? It's because we want banks to be secure. And if things fail it would be up to Belgium to bail out Euroclear. That's an additional reason why it's so crucial for Belgium to get ironclad protections for Euroclear."

The European Union Facing Strain from All Sides

The situation is urgent, warn a group of EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They maintain the proposal to use Russian funds is "a fiscally viable and practically possible solution".

"This is a crucial test for us," warns leading German conservative MP Norbert Röttgen. "Should we not succeed, 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 adamant its money should not be used, there are additional apprehensions among EU officials that the US may want to employ Russia's frozen billions in another way, as part of its own diplomatic proposal.

Zelensky has indicated Ukraine is in discussions with Europe and the US on a reconstruction 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 referred to $100bn of Russia's frozen assets being used by the US for reconstruction, with the US {taking|receiving