Moscow Responds at the EU's Proposal to Loan Immobilized Russian Funds to Kyiv

Ukraine is depleting its 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 solution to plugging Ukraine's financial shortfall of €135.7bn for the following biennium rests with frozen Russian assets held by Belgian bank Euroclear, and Brussels aim to finalize the plan at their EU leaders' conference next week.

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

'Just' to Use Moscow's Funds, Assert Kyiv and Brussels

All told, Russia has about €210bn of its state reserves immobilized in the EU, and €185bn of that is managed by Euroclear.

Brussels and Kyiv argue that money should be used to reconstruct what Russia has laid waste to: Brussels calls it a "reparations loan" and has proposed a plan to support Ukraine's economy amounting to €90bn.

"It is only just that Moscow's blocked funds should be used to rebuild what Russia has devastated – and that that capital then becomes Ukraine's," states Ukrainian President Volodymyr Zelensky.

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

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

Authorities in Brussels is worried it will be burdened by an massive bill if it all fails, and Euroclear head Valérie Urbain argues using the assets could "undermine the global financial architecture".

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

Belgian Prime Minister Bart de Wever has given Brussels a series of "pragmatic, fair, and legitimate conditions" before he will agree to the reparations plan, and he has refused to rule out legal action if it "presents significant risks" for his country.

Explaining the EU's Plan?

The EU is racing against time ahead of next Thursday's summit to come up with a solution that Belgium can agree to.

Previously the EU has refrained from touching the assets themselves directly but for the past year has transferred the "excess income" from them to Ukraine. In 2024 that was €3.7bn. Legally, using the revenue is deemed safe as Russia is sanctioned and the proceeds are not Russian sovereign property.

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

There are at the moment two EU proposals designed to providing Ukraine with €90bn, to finance two-thirds of its budgetary necessities.

• One is to secure the capital on capital markets, backed by the EU budget as a surety. This is Belgium's favored solution but it needs a unanimous vote by EU leaders and that would be difficult when Budapest and Bratislava are against funding Ukraine's military.
• This makes the other option lending Ukraine cash from the frozen Russian funds, which were initially held in securities but have now largely turned into cash. That money is an asset of Euroclear deposited at the European Central Bank.

The EU's executive accepts Belgium has legitimate concerns and says it is confident it has resolved them.

The proposal is for Belgium to be safeguarded with a guarantee encompassing all the €210bn of Russian assets in the EU.

If Euroclear incur losses of its own assets in Russia, that would be offset from assets belonging to Russia's own clearing house which are in the EU.

In the event that Russia went after Belgium itself, any decision by a Russian court would not be enforced in the EU.

In a key development, EU ambassadors are set to approve on Friday to immobilise Russia's central bank assets held in Europe permanently.

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

The EU ambassadors are planning to use an extraordinary measure under Article 122 of the EU Treaties so the assets remain frozen as long as an "direct danger to the economic security of the union" continues.

Why Belgium is Remains Convinced

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

A normally divided political landscape in this case has united behind Prime Minister Bart de Wever, who is being pressured from fellow EU leaders.

"The Belgian economy is not large. Belgian GDP is approximately €565bn – imagine if it would need to bear a €185bn bill," comments Veerle Colaert, expert in financial law at KU Leuven University.

Although the EU might be able to obtain enough guarantees for the loan itself, Belgium worries about an further exposure of being exposed to extra fines or liabilities.

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

"Financial institutions need to adhere to capital and liquidity requirements and shouldn't make one enormous loan. Now the EU is telling Euroclear to do precisely that.

"Why do we have these financial regulations? It's because we want banks to be solvent. And if things fail it would become the responsibility of Belgium to save Euroclear. That's a further cause why it's so important for Belgium to secure water-tight assurances for Euroclear."

EU Leaders In a Difficult Position from Every Direction

Time is of the essence, state seven EU member states including those bordering Russia such as the Baltics, Finland and Poland. They believe the scheme involving immobilized capital is "the financially feasible and politically realistic solution".

"It's a matter of destiny for us," states 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 finalize the deal in a week's time".

While Russia is unyielding its money should not be accessed, there are added concerns among European figures that the US may want to employ Russia's immobilized billions differently, as part of its own diplomatic proposal.

Zelensky has said Ukraine is coordinating with Europe and the US on a rebuilding fund, but he is also mindful the US has been talking to Russia about potential collaboration.

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