Moscow Hits Back at the EU's Scheme to Lend Frozen Russian Funds to Kyiv

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

For Europe, the remedy to filling Kyiv's financial shortfall of €135.7bn for the next two years lies in frozen Russian assets sitting in Belgian bank Euroclear, and Brussels hope to give it the green light at their EU leaders' conference next week.

Moscow's representatives warn the EU plan would be an illegal seizure, and Russia's central bank stated on Friday it was initiating legal action against Euroclear in a Moscow court prior to a conclusive plan is made.

'Appropriate' to Use Moscow's Funds, Argue European and Ukrainian Officials

In total, Russia has about €210bn of its state reserves immobilized in the EU, and €185bn of that is managed by Euroclear.

Brussels and Kyiv argue that those funds should be used to restore what Russia has destroyed: EU officials refers to it as a "reparations loan" and has come up with a plan to prop up Ukraine's economy valued at €90bn.

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

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

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

Belgium is anxious it will be saddled with an massive bill if it all fails, and Euroclear CEO Valérie Urbain says using the assets could "undermine the international financial system".

Euroclear also has an roughly €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 endorse the reconstruction loan scheme, and he has left open the possibility of legal action if it "poses significant risks" for his country.

The Details of the EU's Strategy?

The EU is racing against time prior to next Thursday's summit to agree on a arrangement that Belgium can accept.

Previously the EU has avoided using the frozen capital directly but starting in 2024 has transferred the "extraordinary revenues" from them to Ukraine. In 2024 that was €3.7bn. Legally, using the profits is seen as less risky as Russia is under sanction and the returns are not Russian sovereign property.

But foreign defense assistance for Ukraine has fallen significantly in 2025, and Europe has had trouble trying to cover the deficit resulting from the US decision to all but stop funding Ukraine under President Donald Trump.

There are currently two EU proposals designed to providing Ukraine with €90bn, to pay for a majority of its budgetary necessities.

• One is to secure the capital on the markets, guaranteed by the EU budget as a collateral. This is Belgium's favored solution but it demands a unanimous vote by EU leaders and that would be problematic when Budapest and Bratislava object to funding Ukraine's military.
• The alternative is lending Ukraine cash from the Moscow's immobilized capital, which were at first held in bonds but have now largely matured into cash. That funding is Euroclear property deposited at the European Central Bank.

The EU's executive acknowledges Belgium has justified fears and claims it is assured it has addressed them.

The proposal is for Belgium to be protected with a guarantee applying to all the €210bn of Russian assets in the EU.

If Euroclear face a financial hit 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.

Should Russia took legal action against Belgium itself, any decision by a Russian court would not be recognized 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 for the foreseeable future.

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

The EU ambassadors are planning to use an special provision under Article 122 of the EU Treaties so the assets continue to be immobilized as long as an "immediate threat to the economic security of the union" continues.

Why Belgium is Not Yet On Board

Brussels is firm it remains a staunch ally of Ukraine, but sees legal risks in the plan and is concerned about being shouldering the fallout if things fail.

A usually fractured political scene in this case has come together in support of Prime Minister Bart de Wever, who is being pressured from fellow EU leaders.

"Belgium has a modest-sized economy. Belgian GDP is around €565bn – consider if it would need to carry a €185bn bill," says Veerle Colaert, expert in financial law at KU Leuven University.

Although the EU might be able to arrange sufficient guarantees for the loan itself, Belgium worries about an added risk of being subject to extra fines or liabilities.

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

"Banks need to follow 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 go wrong it would be up to Belgium to rescue Euroclear. That's a further cause why it's so crucial for Belgium to obtain absolute assurances for Euroclear."

EU Leaders Under Pressure from All Sides

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

"It is a decisive moment for us," warns 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".

While Russia is insistent its money should not be used, there are added concerns among European figures that the US may want to employ Russia's immobilized billions in another way, as part of its own peace plan.

Zelensky has indicated Ukraine is in discussions with Europe and the US on a rebuilding fund, but he is also cognizant the US has been holding discussions with Russia about potential collaboration.

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