Russia Responds at Europe's Proposal to Lend Frozen Moscow's Assets to Kyiv

Kyiv remains facing a severe shortage of financial resources to sustain its armed forces and economy afloat, after nearly four years of Russia's full-scale war.

In the view of European leaders, the answer to plugging Kyiv's funding gap of €135.7bn for the next two years lies in assets belonging to Russia that are frozen held by Belgian bank Euroclear, and EU leaders hope to sign that off at their Brussels summit next week.

Moscow's representatives warn the EU plan would be an illegal seizure, and Moscow's monetary authority stated on Friday it was initiating legal action against Euroclear in a Moscow court ahead of a conclusive plan is made.

'Just' to Utilize Moscow's Funds, Say European and Ukrainian Officials

All told, Russia has approximately €210bn of its state reserves 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 refers to it as a "reconstruction loan" and has come up with a plan to prop up Ukraine's economy amounting to €90bn.

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

Germany's leader Friedrich Merz argues the assets will "help Ukraine to protect itself efficiently against future Russian attacks".

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

Belgium is concerned it will be saddled with an enormous bill if it all goes wrong, and Euroclear chief executive Valérie Urbain says using the assets could "destabilise the international financial system".

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

The leader of Belgium Bart de Wever has given Brussels a series of "logical, sensible, and warranted conditions" before he will endorse the reconstruction loan scheme, and he has not excluded legal action if it "poses significant risks" for his country.

Explaining the EU's Proposal?

The EU is racing against time before next Thursday's summit to come up with a solution that Belgium can agree to.

Previously the EU has refrained from using the frozen capital directly but since last year has paid the "windfall profits" from them to Ukraine. In 2024 that amounted to €3.7bn. Juridically, using the interest is deemed less risky as Russia is under sanction and the returns are not property of the Russian state.

But international military aid for Ukraine has declined sharply in 2025, and Europe has had trouble trying to cover the shortfall caused by the US decision to all but stop funding Ukraine under President Donald Trump.

There are at the moment two EU options designed to providing Ukraine with €90bn, to cover two-thirds of its financial requirements.

• The first is to raise the money on the markets, backed by the EU budget as a guarantee. This is Belgium's first choice but it demands a agreement by all by EU leaders and that would be difficult when two member states oppose funding Ukraine's military.
• This makes the other option providing a loan of Ukraine cash from the frozen Russian funds, which were initially held in securities but have now predominantly been converted into cash. That capital is Euroclear property deposited at the European Central Bank.

The European Commission acknowledges Belgium has legitimate concerns and claims it is convinced it has addressed them.

The scheme is for Belgium to be safeguarded with a insurance 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.

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

In a key development, EU ambassadors are poised to endorse on Friday to immobilise Russia's central bank assets held in Europe permanently.

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

The EU ambassadors are set to use an extraordinary measure under Article 122 of the EU Treaties so the assets stay blocked as long as an "direct danger to the economic interests of the union" continues.

The Reasons Belgium is Not Yet On Board

The Belgian government is firm it remains a staunch ally of Ukraine, but identifies legal risks in the plan and worries about being shouldering the repercussions if things fail.

A usually fractured political scene in this case has united behind Prime Minister Bart de Wever, who is being pressured from other European officials.

"The Belgian economy is not large. Belgian GDP is around €565bn – consider 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 enough guarantees for the loan itself, Belgium worries about an added risk of being vulnerable to extra fines or liabilities.

Prof Colaert also argues the stipulation for Euroclear to provide a loan to the EU would violate EU banking regulations.

"Banks need to follow prudential rules and shouldn't make one enormous loan. Now the EU is instructing Euroclear to do exactly that.

"Why do we have these banking laws? It's because we want banks to be stable. And if things turn sour it would become the responsibility of Belgium to save Euroclear. That's another reason why it's so vital for Belgium to get absolute protections for Euroclear."

EU Leaders Under Pressure from All Sides

Time is of the essence, warn a group of EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They argue the frozen assets plan is "a fiscally viable and politically achievable 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 afterwards. That's why we have to finalize the deal in a week's time".

Although Russia is unyielding its money should not be used, there are additional apprehensions among leaders in Europe that the US may want to use Russia's blocked funds in another way, as part of its own peace plan.

Zelensky has said Ukraine is working with Europe and the US on a recovery fund, but he is also aware the US has been engaging with Russia about possible partnership.

A preliminary version 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