Russia Responds at the EU's Proposal to Loan Frozen Moscow's Funds to Kyiv

Kyiv remains running out of financial resources to keep going its armed forces and economy, after close to 48 months of the ongoing invasion by Moscow.

In the view of European leaders, the remedy to addressing Ukraine's budget hole of €135.7bn for the next two years rests with frozen Russian assets located within Belgian bank Euroclear, and EU leaders hope to sign that off at their meeting in Brussels next week.

Russian officials caution the EU plan would be an act of theft, and Russia's central bank stated on Friday it was suing Euroclear in a Moscow court ahead of a conclusive plan is made.

'Just' to Utilize Russia's Funds, Say Kyiv and Brussels

Overall, Russia has about €210bn of its assets frozen in the EU, and €185bn of that is managed by Euroclear.

European and Ukrainian authorities contend that money should be used to rebuild what Russia has destroyed: EU officials terms it a "reconstruction loan" and has proposed a plan to bolster Ukraine's economy valued at €90bn.

"It's only fair that the assets frozen from Russia should be used to rebuild what Russia has destroyed – and that that capital then becomes ours," remarks Ukrainian President Volodymyr Zelensky.

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

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

The Belgian government is worried it will be saddled with an huge bill if it all fails, and Euroclear CEO Valérie Urbain warns using the assets could "undermine the international financial system".

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

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

Explaining the EU's Strategy?

Brussels is working to the wire ahead of next Thursday's summit to agree on a compromise that Belgium can agree to.

So far the EU has held off accessing the frozen capital directly but since last year has directed the "windfall profits" from them to Ukraine. In 2024 that was €3.7bn. Juridically, using the interest is considered permissible as Russia is under sanction and the returns are not property of the Russian state.

But global military support for Ukraine has slipped dramatically in 2025, and Europe has struggled to cover the shortfall caused by the US decision to virtually halt funding Ukraine under President Donald Trump.

There are currently two EU plans aimed at supplying Ukraine with €90bn, to pay for a majority of its budgetary necessities.

• One is to secure the capital on financial markets, backed by the EU budget as a guarantee. This is Belgium's preferred option but it demands a unanimous vote by EU leaders and that would be problematic when two member states object to funding Ukraine's military.
• This makes the other option lending Ukraine cash from the Russian assets, which were originally held in bonds but have now predominantly been converted into cash. That funding is owned by Euroclear held in the European Central Bank.

The European Commission recognizes Belgium has legitimate concerns and says it is confident it has addressed them.

The scheme is for Belgium to be safeguarded with a insurance encompassing all the €210bn of Russian assets in the EU.

If Euroclear suffer a loss of its own assets in Russia, that would be offset from assets belonging to Russia's own settlement agency which are in the EU.

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

In a significant move, EU ambassadors are expected to agree 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 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 "direct danger to the economic interests of the union" continues.

Why Belgium is Remains Satisfied

Belgium is insistent it remains a staunch ally of Ukraine, but sees legal risks in the plan and fears being left to handle the repercussions if things do not work out.

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

"Belgium has a modest-sized economy. 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 enough protections for the loan itself, Belgium is concerned about an further exposure of being exposed to extra damages or penalties.

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

"Banks need to comply with prudential rules and shouldn't put all their eggs in one basket. Now the EU is instructing Euroclear to do exactly that.

"Why do we have these financial regulations? It's because we want banks to be secure. And if things turn sour it would become the responsibility of Belgium to save Euroclear. That's another reason why it's so crucial for Belgium to secure absolute guarantees for Euroclear."

The European Union Facing Strain from All Sides

The situation is urgent, state several EU member states including those bordering 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," says leading German conservative MP Norbert Röttgen. "If the plan collapses, I don't know what we'll do subsequently. That's why we have to succeed in a week's time".

While Russia is unyielding its money should not be touched, there are added concerns 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 said Ukraine is in discussions with Europe and the US on a rebuilding fund, but he is also aware the US has been holding discussions with Russia about possible partnership.

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