Moscow Hits Back at Europe's Plan to Loan Frozen Moscow's Funds to Ukraine

Kyiv remains facing a severe shortage of funding to keep going its military and economy afloat, after almost four years of Russia's full-scale war.

From the EU's perspective, the remedy to addressing Ukraine's financial shortfall of €135.7bn for the next two years lies in Moscow's immobilized funds held by Belgian bank Euroclear, and EU leaders aim to finalize the plan at their Brussels summit next week.

Moscow's representatives warn the EU plan would be an illegal seizure, and Russia's central bank announced on Friday it was initiating legal action against Euroclear in a Moscow court ahead of a final decision is made.

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

All told, Russia has approximately €210bn of its state reserves blocked in the EU, and €185bn of that is in the custody of Euroclear.

The EU and Ukraine maintain that that capital should be used to rebuild what Russia has laid waste to: Brussels terms it a "reparations loan" and has come up with a plan to prop up Ukraine's economy amounting to €90bn.

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

German Chancellor Friedrich Merz states the assets will "help Ukraine to defend itself effectively against subsequent Russian attacks".

Moscow's lawsuit was anticipated in Brussels. But it is not just Moscow that is concerned.

Authorities in Brussels is worried it will be left with an huge bill if it all backfires, and Euroclear chief executive Valérie Urbain warns using the assets could "disrupt the world's financial order".

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

Belgian Prime Minister Bart de Wever has presented the EU with a series of "pragmatic, fair, and legitimate conditions" before he will accept the reparations plan, and he has left open the possibility of legal action if it "presents significant risks" for his country.

Explaining the EU's Proposal?

The EU is racing against time before next Thursday's summit to finalize a compromise that Belgium can accept.

Until now the EU has held off accessing the frozen capital directly but for the past year has paid the "extraordinary revenues" from them to Ukraine. In 2024 that was €3.7bn. From a legal standpoint, using the revenue is seen as less risky as Russia is under sanction and the earnings are not Russian sovereign property.

But global military support for Ukraine has declined sharply in 2025, and Europe has had trouble trying to cover the gap resulting from the US decision to largely cease funding Ukraine under President Donald Trump.

There are currently two EU options designed to providing Ukraine with €90bn, to finance a majority of its financial requirements.

• The first is to borrow the funds on the markets, guaranteed by the EU budget as a collateral. This is Belgium's first choice but it requires a unanimous vote by EU leaders and that would be difficult when two member states are against funding Ukraine's military.
• This makes the other option lending Ukraine cash from the Moscow's immobilized capital, which were originally held in financial instruments but have now mostly matured into cash. That funding is Euroclear property located within the European Central Bank.

The European Commission accepts Belgium has valid worries and says it is assured it has resolved them.

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

Should 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.

If Russia went after Belgium itself, any judgment by a Russian court would not be accepted in the EU.

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

Heretofore they have had to vote all together every six months to renew the freeze, which could have meant a ongoing risk to Belgium.

The EU ambassadors are planning to use an extraordinary measure under Article 122 of the EU Treaties so the assets continue to be immobilized as long as an "clear risk to the economic interests of the union" continues.

The Reasons Belgium is Not Yet Satisfied

Belgium is insistent it remains a committed partner of Ukraine, but perceives legal risks in the plan and is concerned about being forced to deal with the consequences if things do not work out.

A usually fractured political scene in this case has rallied behind Prime Minister Bart de Wever, who is under pressure from European colleagues.

"The Belgian economy is not large. Belgian GDP is around €565bn – think about if it would need to shoulder a €185bn bill," says Veerle Colaert, professor of financial law at KU Leuven University.

While the EU might be able to arrange adequate assurances for the loan itself, Belgium is concerned about an additional danger of being exposed to extra fines or liabilities.

Prof Colaert also argues the requirement for Euroclear to issue credit to the EU would violate EU banking regulations.

"Financial institutions need to follow capital and liquidity requirements and shouldn't concentrate risk. Now the EU is telling Euroclear to do just that.

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

The European Union In a Difficult Position from Every Direction

There is no time to lose, state seven EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They believe the proposal to use Russian funds 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 next. That's why we have to reach an agreement in a week's time".

Although Russia is adamant its money should not be touched, there are further worries among European figures that the US may want to use Russia's frozen billions in another way, as part of its own peace initiative.

Zelensky has indicated Ukraine is in discussions with Europe and the US on a recovery fund, but he is also mindful the US has been holding discussions with 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