Russia Retaliates at the EU's Scheme to Loan Frozen Moscow's Assets to Kyiv

Kyiv remains running out of cash to keep going its armed forces and economy afloat, after close to 48 months of full-scale conflict with Russia.

From the EU's perspective, the remedy to addressing Ukraine's financial shortfall of €135.7bn for the following biennium is found in assets belonging to Russia that are frozen located within Belgian bank Euroclear, and European Union officials hope to give it the green light at their meeting in Brussels next week.

Moscow's representatives warn the EU plan would be an illegal seizure, and Russia's central bank stated on Friday it was taking to court Euroclear in a Moscow court even before a final decision is made.

'Appropriate' to Utilize Russia's Funds, Assert Kyiv and Brussels

In total, Russia has approximately €210bn of its assets blocked in the EU, and €185bn of that is in the custody of Euroclear.

The EU and Ukraine maintain that those funds should be used to reconstruct what Russia has laid waste to: Brussels calls it a "reparations loan" and has devised a plan to support Ukraine's economy to the tune of €90bn.

"It's only fair that the assets frozen from Russia should be used to reconstruct what Russia has destroyed – and that that capital then becomes Ukraine's," says Ukraine's Volodymyr Zelensky.

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

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

Authorities in Brussels is anxious it will be burdened by an huge bill if it all goes wrong, and Euroclear chief executive Valérie Urbain warns using the assets could "disrupt the world's financial order".

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

The leader of Belgium Bart de Wever has presented the EU with a series of "logical, sensible, and warranted conditions" before he will agree to the reconstruction loan scheme, and he has left open the possibility of legal action if it "carries significant risks" for his country.

The Details of the EU's Proposal?

The EU is working to the wire prior to next Thursday's summit to agree on a arrangement that Belgium can support.

So far the EU has avoided using the frozen capital directly but starting in 2024 has transferred the "windfall profits" from them to Ukraine. In 2024 that amounted to €3.7bn. From a legal standpoint, using the revenue is seen as safe as Russia is under sanction and the earnings are not Moscow's sovereign assets.

But international military aid for Ukraine has slipped dramatically in 2025, and Europe has had trouble trying to make up the shortfall left by the US decision to all but stop funding Ukraine under President Donald Trump.

There are at the moment two EU proposals aimed at providing Ukraine with €90bn, to finance two-thirds of its funding needs.

• Option one is to raise the money on the markets, secured against the EU budget as a collateral. This is Belgium's favored solution but it requires a consensus by EU leaders and that would be difficult when Hungary and Slovakia oppose funding Ukraine's military.
• This makes the other option providing a loan of Ukraine cash from the frozen Russian funds, which were originally held in financial instruments but have now mostly been converted into cash. That capital is an asset of Euroclear held in the European Central Bank.

The European Commission acknowledges Belgium has legitimate concerns and claims it is assured it has dealt with them.

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

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

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

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

Heretofore they have had to vote unanimously every six months to extend 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 continue to be immobilized as long as an "direct danger to the financial well-being of the union" continues.

The Reasons Belgium is Not Yet Convinced

Brussels is firm it remains a committed partner of Ukraine, but identifies regulatory pitfalls in the plan and is concerned about being shouldering the consequences if things do not work out.

A typically partisan political environment in this case has come together in support of Prime Minister Bart de Wever, who is being pressured from other European officials.

"Belgium has a modest-sized economy. Belgian GDP is approximately €565bn – imagine if it would need to shoulder a €185bn bill," says Veerle Colaert, academic specializing in financial regulation at KU Leuven University.

Although the EU might be able to secure adequate guarantees for the loan itself, Belgium fears an additional danger of being exposed to extra legal costs.

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

"Financial institutions need to follow stability regulations and shouldn't make one enormous loan. Now the EU is instructing Euroclear to do just that.

"What is the purpose of these banking laws? 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 another reason why it's so important for Belgium to get ironclad guarantees for Euroclear."

EU Leaders Under Pressure from All Sides

Time is of the essence, 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 "a economically realistic and practically possible 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 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 indicated Ukraine is working with Europe and the US on a reconstruction fund, but he is also cognizant the US has been talking to Russia about potential collaboration.

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