Russia Responds at Europe's Plan to Loan Immobilized Moscow's Funds to Ukraine

Ukraine is running out of cash to sustain its armed forces and economy, after close to 48 months of full-scale conflict with Russia.

For Europe, the solution to addressing Kyiv's budget hole of €135.7bn for the next two years rests with assets belonging to Russia that are frozen located within Belgian bank Euroclear, and EU leaders seek to finalize the plan at their EU leaders' conference next week.

Russian officials state the EU plan would be an confiscation, and Russia's central bank stated on Friday it was taking to court Euroclear in a Moscow court prior to a final decision is made.

'Appropriate' to Employ Moscow's Assets, Argue Ukraine and the EU

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

European and Ukrainian authorities maintain that those funds should be used to rebuild what Russia has destroyed: Brussels refers to it as a "reparations loan" and has devised 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 reconstruct what Russia has devastated – and that money then becomes ours," states Ukrainian President Volodymyr Zelensky.

Chancellor Friedrich Merz states the assets will "enable Ukraine to defend itself efficiently against any future Russian attacks".

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

Authorities in Brussels is concerned it will be burdened by an huge 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 roughly €16-17bn frozen in Russia.

Belgium's PM Bart de Wever has set the EU a series of "logical, sensible, and warranted conditions" before he will endorse the reparations plan, and he has refused to rule out legal action if it "presents significant risks" for his country.

The Details of 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.

Until now the EU has refrained from using the principal funds directly but since last year has transferred the "excess income" from them to Ukraine. In 2024 that amounted to €3.7bn. Juridically, using the revenue is seen as safe as Russia is subject to sanctions and the earnings are not Russian sovereign property.

But international military aid for Ukraine has slipped dramatically in 2025, and Europe has found it difficult to compensate for the gap left by the US decision to virtually halt funding Ukraine under President Donald Trump.

There are currently two EU options seeking to furnishing Ukraine with €90bn, to cover a majority of its funding needs.

• One is to borrow the funds on capital markets, secured against the EU budget as a surety. This is Belgium's preferred option but it demands a unanimous vote by EU leaders and that would be problematic when Hungary and Slovakia object to funding Ukraine's military.
• The alternative is lending Ukraine cash from the Russian assets, which were at first held in financial instruments but have now mostly been converted into cash. That money is an asset of Euroclear held in the European Central Bank.

The European Commission accepts Belgium has valid worries and states it is confident it has resolved them.

The proposal is for Belgium to be shielded with a assurance covering 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 clearing house which are in the EU.

If Russia went after Belgium itself, any decision by a Russian court would not be recognized in the EU.

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

Heretofore they have had to vote by consensus every six months to continue the freeze, which could have meant a repeated risk to Belgium.

The EU ambassadors are planning to use an special provision under Article 122 of the EU Treaties so the assets remain frozen as long as an "immediate threat to the economic interests of the union" continues.

Why Belgium is Remains On Board

Belgium is adamant it remains a staunch ally of Ukraine, but perceives legal risks in the plan and worries about being shouldering the fallout if things go wrong.

A typically fractured political scene in this case has come together in support of Prime Minister Bart de Wever, who is under pressure from other European officials.

"The Belgian economy is not large. Belgian GDP is about €565bn – consider if it would need to shoulder a €185bn bill," says Veerle Colaert, professor of financial law at KU Leuven University.

Although the EU might be able to obtain adequate guarantees for the loan itself, Belgium is concerned about an further exposure of being exposed to extra damages or penalties.

Prof Colaert also argues the demand for Euroclear to grant a loan 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 just that.

"Why do we have these bank rules? 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 another reason why it's so important for Belgium to secure ironclad guarantees for Euroclear."

EU Leaders In a Difficult Position from Every Direction

There is no time to lose, caution a group of EU member states including those closest to Russia such as the Baltics, Finland and Poland. They maintain the scheme involving immobilized capital is "a fiscally viable and politically achievable solution".

"This is a crucial test 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 accessed, there are additional apprehensions among leaders in Europe that the US may want to employ Russia's blocked funds in another way, as part of its own diplomatic proposal.

Zelensky has stated Ukraine is in discussions with Europe and the US on a rebuilding fund, but he is also mindful the US has been holding discussions with Russia about potential collaboration.

An early draft of the US peace plan referred to $100bn of Russia's blocked funds being used by the US for reconstruction, with the US {taking|receiving