Moscow Responds at the EU's Plan to Loan Frozen Moscow's Funds to Kyiv

Ukraine is facing a severe shortage of funding to sustain its military and economy, after almost four years of full-scale conflict with Russia.

For Europe, the answer to addressing Kyiv's budget hole of €135.7bn for the next two years is found in Moscow's immobilized funds located within Belgian bank Euroclear, and EU leaders hope to sign that off at their meeting in Brussels next week.

Russian officials warn the EU plan would be an illegal seizure, and the Central Bank of Russia declared on Friday it was suing Euroclear in a Moscow court ahead of a final decision is made.

'Just' to Use Russia's Funds, Assert European and Ukrainian Officials

Overall, Russia has approximately €210bn of its funds immobilized in the EU, and €185bn of that is held by Euroclear.

European and Ukrainian authorities contend that that capital should be used to restore what Russia has devastated: The European Commission refers to it as a "reconstruction loan" and has come up with a plan to bolster Ukraine's economy valued at €90bn.

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

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

The legal move by Moscow was expected in Brussels. But it is not only Moscow that is dissatisfied.

Belgium is worried it will be burdened by an huge bill if it all fails, and Euroclear head Valérie Urbain says using the assets could "undermine the global financial architecture".

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

Belgian Prime Minister Bart de Wever has given Brussels a series of "rational, reasonable, and justified conditions" before he will agree to the reparations plan, and he has not excluded legal action if it "presents significant risks" for his country.

The Details of the EU's Proposal?

The EU is under pressure ahead of next Thursday's summit to finalize a solution that Belgium can accept.

So far the EU has refrained from accessing the assets themselves directly but since last year has directed the "windfall profits" from them to Ukraine. In 2024 that was €3.7bn. Juridically, using the interest is considered safe as Russia is sanctioned and the earnings are not Russian sovereign property.

But foreign defense assistance for Ukraine has slipped dramatically in 2025, and Europe has had trouble trying to make up the shortfall left by the US decision to virtually halt funding Ukraine under President Donald Trump.

There are currently two EU proposals aimed at furnishing Ukraine with €90bn, to finance two-thirds of its financial requirements.

• One is to secure the capital on financial markets, backed by the EU budget as a guarantee. This is Belgium's preferred option but it requires a agreement by all by EU leaders and that would be challenging when Budapest and Bratislava are against funding Ukraine's military.
• The alternative is lending Ukraine cash from the frozen Russian funds, which were originally held in bonds but have now largely matured into cash. That funding is owned by Euroclear held in the European Central Bank.

The EU's executive recognizes Belgium has legitimate concerns and states it is convinced it has resolved them.

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

If Euroclear face a financial hit 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.

In the event that Russia took legal action against Belgium itself, any ruling by a Russian court would not be accepted in the EU.

As an important step, EU ambassadors are set to approve on Friday to permanently block Russia's central bank assets held in Europe for the foreseeable future.

Previously they have had to vote unanimously every six months to continue 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 "immediate threat to the economic interests of the union" continues.

Why Belgium is Not Yet Convinced

Brussels is insistent it remains a staunch ally of Ukraine, but identifies legal risks in the plan and is concerned about being shouldering the repercussions if things fail.

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

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

Although the EU might be able to obtain sufficient protections for the loan itself, Belgium worries about an additional danger of being subject to extra legal costs.

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

"Lenders need to follow 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 stable. And if things fail it would fall to Belgium to bail out Euroclear. That's another reason why it's so important for Belgium to get water-tight guarantees for Euroclear."

The European Union In a Difficult Position from All Sides

The situation is urgent, caution a group of EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They believe the scheme involving immobilized capital is "the most economically realistic and politically realistic solution".

"It is a decisive moment for us," says leading German conservative MP Norbert Röttgen. "Should we not succeed, I don't know what we'll do next. That's why we have to succeed in a week's time".

Although Russia is insistent its money should not be used, there are further worries among leaders in Europe that the US may want to use Russia's frozen billions differently, as part of its own peace plan.

Zelensky has said 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.

A preliminary version 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