Russia Retaliates at the EU's Proposal to Lend Immobilized Russian Cash to Kyiv

Kyiv remains running out of financial resources to keep going its military and economy, after close to 48 months of Russia's full-scale war.

From the EU's perspective, the answer to filling Kyiv's budget hole of €135.7bn for the next two years lies in assets belonging to Russia that are frozen located within Belgian bank Euroclear, and Brussels aim to give it the green light at their Brussels summit next week.

Authorities in Russia warn the EU plan would be an act of theft, and Moscow's monetary authority stated on Friday it was initiating legal action against Euroclear in a Moscow court prior to a conclusive plan is made.

'Appropriate' to Use Russia's Funds, Say Ukraine and the EU

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

The EU and Ukraine contend that those funds should be used to restore what Russia has laid waste to: The European Commission calls it a "reparations loan" and has come up with a plan to support Ukraine's economy valued at €90bn.

"It's only fair that the assets frozen from Russia should be used to rebuild what Russia has destroyed – and that those funds then becomes ours," states Ukrainian President Volodymyr Zelensky.

German Chancellor Friedrich Merz states the assets will "allow Ukraine to shield itself successfully against subsequent Russian attacks".

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

The Belgian government is anxious it will be left with an massive bill if it all goes wrong, and Euroclear CEO Valérie Urbain warns using the assets could "disrupt the international financial system".

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

Belgian Prime Minister Bart de Wever has given Brussels a series of "logical, sensible, and warranted conditions" before he will accept the reparations plan, and he has not excluded legal action if it "presents significant risks" for his country.

What is the EU's Proposal?

The EU is working to the wire prior to next Thursday's summit to finalize a solution that Belgium can accept.

Previously the EU has held off touching the principal funds directly but since last year has paid the "windfall profits" from them to Ukraine. In 2024 that totaled €3.7bn. From a legal standpoint, using the interest is seen as safe as Russia is sanctioned and the returns are not Moscow's sovereign assets.

But global military support for Ukraine has slipped dramatically in 2025, and Europe has had trouble trying to cover the deficit left by the US decision to all but stop funding Ukraine under President Donald Trump.

There are currently two EU plans aimed at supplying Ukraine with €90bn, to finance a large portion of its financial requirements.

• Option one is to borrow the funds on financial markets, secured against the EU budget as a guarantee. This is Belgium's favored solution but it requires a consensus by EU leaders and that would be problematic when two member states oppose funding Ukraine's military.
• That leaves lending Ukraine cash from the frozen Russian funds, which were at first held in bonds but have now largely been converted into cash. That capital is an asset of Euroclear located within the European Central Bank.

Brussels' executive arm recognizes Belgium has legitimate concerns and says it is convinced it has addressed them.

The plan is for Belgium to be shielded 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.

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

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

Heretofore they have had to vote unanimously every six months to extend the freeze, which could have meant a constant risk to Belgium.

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

The Reasons Belgium is Still Not On Board

The Belgian government is firm it remains a committed partner of Ukraine, but identifies legal risks in the plan and fears being shouldering the fallout if things do not work out.

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

"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.

While the EU might be able to obtain sufficient assurances for the loan itself, Belgium fears an added risk of being vulnerable to extra legal costs.

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

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

"Why do we have these bank rules? It's because we want banks to be solvent. And if things fail it would be up to Belgium to save Euroclear. That's an additional reason why it's so crucial for Belgium to obtain water-tight guarantees for Euroclear."

The European Union Under Pressure from Every Direction

Time is of the essence, caution several EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They believe the scheme involving immobilized capital is "a fiscally viable and politically realistic solution".

"It's a matter of destiny for us," states 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".

Although Russia is adamant its money should not be accessed, there are further worries among European figures that the US may want to use Russia's blocked funds for another purpose, 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 engaging with Russia about possible partnership.

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