Russia Hits Back at Europe's Plan to Lend Frozen Russian Funds to Ukraine

Ukraine is depleting its financial resources to sustain its armed forces and economy afloat, after nearly four years of full-scale conflict with Russia.

For Europe, the answer to plugging Ukraine's funding gap of €135.7bn for the next two years rests with assets belonging to Russia that are frozen sitting in Belgian bank Euroclear, and EU leaders hope to finalize the plan at their EU leaders' conference next week.

Moscow's representatives warn the EU plan would be an confiscation, and the Central Bank of Russia declared on Friday it was initiating legal action against Euroclear in a Moscow court even before a definitive agreement is made.

'Only Fair' to Employ Moscow's Funds, Say European and Ukrainian Officials

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

Brussels and Kyiv argue that that capital should be used to restore what Russia has devastated: The European Commission terms it a "reparations loan" and has come up with a plan to prop up Ukraine's economy valued at €90bn.

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

Germany's leader Friedrich Merz says the assets will "help Ukraine to shield itself effectively against future Russian attacks".

Moscow's lawsuit was foreseen in Brussels. But it is not just Moscow that is unhappy.

Authorities in Brussels is anxious it will be left with an huge bill if it all goes wrong, and Euroclear chief executive Valérie Urbain says using the assets could "undermine the international financial system".

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

Belgium's PM Bart de Wever has given Brussels a series of "pragmatic, fair, and legitimate conditions" before he will accept the reconstruction loan scheme, and he has left open the possibility of legal action if it "poses significant risks" for his country.

What is the EU's Strategy?

Brussels is racing against time before next Thursday's summit to finalize a compromise that Belgium can support.

Until now the EU has avoided touching the principal funds directly but for the past year has transferred the "extraordinary revenues" from them to Ukraine. In 2024 that amounted to €3.7bn. Legally, using the revenue is considered permissible as Russia is sanctioned and the returns are not property of the Russian state.

But global military support for Ukraine has fallen significantly in 2025, and Europe has struggled to cover the shortfall left by the US decision to largely cease funding Ukraine under President Donald Trump.

There are at the moment two EU proposals designed to supplying Ukraine with €90bn, to cover two-thirds of its funding needs.

• One is to raise the money on capital markets, backed 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 problematic when Budapest and Bratislava oppose funding Ukraine's military.
• This makes the other option providing a loan of Ukraine cash from the Moscow's immobilized capital, which were at first held in bonds but have now mostly matured into cash. That funding is an asset of Euroclear located within the European Central Bank.

The European Commission recognizes Belgium has legitimate concerns and states it is convinced it has resolved them.

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

Should Euroclear suffer a loss of its own assets in Russia, that would be offset from assets belonging to Russia's own settlement agency which are in the EU.

Should Russia targeted Belgium itself, any decision by a Russian court would not be accepted in the EU.

As an important step, EU ambassadors are poised to endorse on Friday to permanently block Russia's central bank assets held in Europe indefinitely.

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

The EU ambassadors are set to use an extraordinary measure under Article 122 of the EU Treaties so the assets remain frozen as long as an "clear risk to the economic interests of the union" continues.

Why Belgium is Not Yet On Board

Belgium is adamant it remains a strong supporter of Ukraine, but identifies legal risks in the plan and worries about being forced to deal with the repercussions if things go wrong.

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

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

While the EU might be able to arrange sufficient assurances for the loan itself, Belgium is concerned about an further exposure of being subject to extra damages or penalties.

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

"Lenders need to adhere to stability regulations and shouldn't make one enormous loan. Now the EU is telling Euroclear to do precisely that.

"What is the purpose of these bank rules? It's because we want banks to be secure. And if things fail it would become the responsibility of Belgium to rescue Euroclear. That's an additional reason why it's so crucial for Belgium to secure ironclad protections 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 bordering Russia such as the Baltics, Finland and Poland. They believe the frozen assets plan is "the fiscally viable and politically achievable solution".

"It's a matter of destiny for us," says leading German conservative MP Norbert Röttgen. "If the plan collapses, I don't know what we'll do subsequently. That's why we have to succeed in a week's time".

While Russia is adamant its money should not be touched, there are additional apprehensions among EU officials that the US may want to use Russia's frozen billions in another way, as part of its own diplomatic proposal.

Zelensky has indicated Ukraine is coordinating with Europe and the US on a recovery fund, but he is also aware the US has been holding discussions with Russia about possible partnership.

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