Moscow Retaliates at Europe's Proposal to Lend Immobilized Moscow's Cash to Kyiv

Kyiv remains running out of funding to maintain its armed forces and economy, after close to 48 months of full-scale conflict with Russia.

For Europe, the solution to plugging Kyiv's funding gap of €135.7bn for the coming 24 months is found in assets belonging to Russia that are frozen sitting in Belgian bank Euroclear, and Brussels aim to sign that off at their meeting in Brussels next week.

Moscow's representatives caution the EU plan would be an confiscation, 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 Employ Moscow's Assets, Assert Kyiv and Brussels

Overall, Russia has approximately €210bn of its state reserves blocked in the EU, and €185bn of that is managed by Euroclear.

Brussels and Kyiv argue that money should be used to restore what Russia has laid waste to: Brussels terms it a "loan for reparations" and has devised a plan to bolster Ukraine's economy valued at €90bn.

"It is only just that Russia's frozen assets should be used to reconstruct what Russia has destroyed – and that money then becomes ours," remarks Ukrainian President Volodymyr Zelensky.

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

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

Authorities in Brussels is anxious it will be burdened by an huge bill if it all backfires, and Euroclear chief executive Valérie Urbain says using the assets could "disrupt the global financial architecture".

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

Belgian Prime Minister Bart de Wever has set the EU a series of "rational, reasonable, and justified conditions" before he will endorse the reconstruction loan scheme, and he has not excluded legal action if it "presents significant risks" for his country.

What is the EU's Plan?

Brussels is under pressure before next Thursday's summit to finalize a compromise that Belgium can agree to.

So far the EU has refrained from accessing the assets themselves directly but starting in 2024 has directed the "excess income" from them to Ukraine. In 2024 that was €3.7bn. From a legal standpoint, using the profits is seen as permissible as Russia is subject to sanctions and the proceeds are not Russian sovereign property.

But global military support for Ukraine has fallen significantly in 2025, and Europe has had trouble trying to cover the deficit left by the US decision to virtually halt funding Ukraine under President Donald Trump.

There are currently two EU options designed to furnishing Ukraine with €90bn, to pay for a large portion of its financial requirements.

• The first is to borrow the funds on the markets, backed by the EU budget as a collateral. This is Belgium's preferred option but it requires a unanimous vote by EU leaders and that would be problematic when Hungary and Slovakia object to funding Ukraine's military.
• This makes the other option providing a loan of Ukraine cash from the Russian assets, which were originally held in securities but have now predominantly been converted into cash. That money is an asset of Euroclear held in the European Central Bank.

The EU's executive recognizes Belgium has justified fears and states it is confident it has addressed them.

The scheme is for Belgium to be protected with a guarantee 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 settlement agency which are in the EU.

In the event that Russia went after Belgium itself, any ruling by a Russian court would not be enforced in the EU.

As an important step, EU ambassadors are set to approve on Friday to freeze indefinitely Russia's central bank assets held in Europe for the foreseeable future.

Heretofore they have had to vote all together every six months to continue 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 "immediate threat to the economic security of the union" continues.

Why Belgium is Remains Satisfied

Belgium is firm it remains a staunch ally of Ukraine, but perceives legal risks in the plan and is concerned about being shouldering the repercussions if things go wrong.

A typically 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 shoulder a €185bn bill," says Veerle Colaert, expert in financial law at KU Leuven University.

Although the EU might be able to obtain enough guarantees for the loan itself, Belgium fears an further exposure of being vulnerable to extra legal costs.

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

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

"Why do we have these financial regulations? It's because we want banks to be solvent. And if things go wrong it would fall to Belgium to bail out Euroclear. That's another reason why it's so crucial for Belgium to obtain water-tight protections for Euroclear."

The European Union In a Difficult Position from All Sides

Time is of the essence, caution seven EU member states including those closest to Russia such as the Baltics, Finland and Poland. They believe the proposal to use Russian funds is "a economically realistic and politically achievable solution".

"This is a crucial test for us," says leading German conservative MP Norbert Röttgen. "If we fail, I don't know what we'll do next. That's why we have to succeed in a week's time".

Although Russia is unyielding 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 said Ukraine is working with Europe and the US on a rebuilding 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 immobilized capital being used by the US for reconstruction, with the US {taking|receiving