Russia Retaliates at the EU's Proposal to Lend Immobilized Moscow's Assets to Ukraine

Ukraine is depleting its cash to maintain its armed forces and economy, after almost four years of full-scale conflict with Russia.

For Europe, the answer to addressing Ukraine's budget hole of €135.7bn for the next two years lies in frozen Russian assets held by 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 illegal seizure, and Moscow's monetary authority announced on Friday it was taking to court Euroclear in a Moscow court ahead of a definitive agreement is made.

'Appropriate' to Use Russia's Funds, Say Kyiv and Brussels

In total, Russia has approximately €210bn of its state reserves frozen in the EU, and €185bn of that is held by Euroclear.

Brussels and Kyiv argue that that capital should be used to rebuild what Russia has devastated: The European Commission terms it a "reparations loan" and has devised a plan to prop up Ukraine's economy amounting to €90bn.

"It is appropriate that the assets frozen from Russia should be used to rebuild what Russia has devastated – and that money then becomes ours," remarks Ukrainian President Volodymyr Zelensky.

Chancellor Friedrich Merz says the assets will "enable Ukraine to protect itself effectively against any future Russian attacks".

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

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

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

Belgium's PM Bart de Wever has presented the EU with a series of "rational, reasonable, and justified conditions" before he will agree to the reparations plan, and he has refused to rule out legal action if it "carries significant risks" for his country.

Explaining the EU's Strategy?

The EU is under pressure before next Thursday's summit to agree on a solution that Belgium can agree to.

So far the EU has avoided using the principal funds directly but starting in 2024 has paid the "windfall profits" from them to Ukraine. In 2024 that was €3.7bn. Legally, using the profits is seen as permissible as Russia is under sanction and the returns are not Russian sovereign property.

But global military support for Ukraine has declined sharply in 2025, and Europe has found it difficult to compensate for the gap resulting from the US decision to virtually halt funding Ukraine under President Donald Trump.

There are currently two EU plans designed to supplying Ukraine with €90bn, to pay for two-thirds of its funding needs.

• One is to borrow the funds on the markets, guaranteed by the EU budget as a surety. This is Belgium's favored solution but it requires a consensus by EU leaders and that would be difficult when Budapest and Bratislava are against funding Ukraine's military.
• The alternative is loaning Ukraine cash from the Moscow's immobilized capital, which were at first held in securities but have now largely turned into cash. That funding is an asset of Euroclear deposited at the European Central Bank.

The European Commission recognizes Belgium has justified fears and says it is convinced it has dealt with them.

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

Should Euroclear face a financial hit 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.

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

In a key development, EU ambassadors are poised to endorse on Friday to permanently block 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 constant risk to Belgium.

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

Why Belgium is Still Not Satisfied

Belgium is adamant it remains a strong supporter of Ukraine, but sees juridical dangers in the plan and fears being forced to deal with the fallout if things go wrong.

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 approximately €565bn – consider if it would need to carry a €185bn bill," notes Veerle Colaert, professor of financial law at KU Leuven University.

Although the EU might be able to arrange adequate protections for the loan itself, Belgium is concerned about an added risk of being subject to extra damages or penalties.

Prof Colaert also believes the demand for Euroclear to issue credit to the EU would contravene EU banking regulations.

"Financial institutions need to comply with capital and liquidity requirements and shouldn't concentrate risk. Now the EU is asking 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 become the responsibility of Belgium to save Euroclear. That's an additional reason why it's so crucial for Belgium to obtain ironclad protections for Euroclear."

Europe Under Pressure from Multiple Fronts

There is no time to lose, state seven EU member states including those closest to Russia such as the Baltics, Finland and Poland. They maintain the proposal to use Russian funds is "the financially feasible and politically achievable solution".

"This is a crucial test for us," warns 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 finalize the deal in a week's time".

While Russia is unyielding its money should not be touched, there are added concerns among EU officials that the US may want to use Russia's frozen billions for another purpose, as part of its own peace plan.

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 engaging with Russia about future co-operation.

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