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

Ukraine is depleting its financial resources to sustain its military and economy, after close to 48 months of full-scale conflict with Russia.

For Europe, the answer to plugging Kyiv's budget hole of €135.7bn for the following biennium is found in assets belonging to Russia that are frozen held by Belgian bank Euroclear, and Brussels aim to finalize the plan at their EU leaders' conference next week.

Russian officials warn the EU plan would be an illegal seizure, and Moscow's monetary authority declared on Friday it was suing Euroclear in a Moscow court even before a final decision is made.

'Just' to Use Moscow's Funds, Assert Kyiv and Brussels

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

European and Ukrainian authorities argue that that capital should be used to reconstruct what Russia has devastated: The European Commission terms it a "reconstruction loan" and has proposed a plan to prop up Ukraine's economy amounting to €90bn.

"It is only just that Moscow's blocked funds should be used to reconstruct what Russia has destroyed – and that money then becomes Ukraine's," says Ukraine's Volodymyr Zelensky.

Germany's leader Friedrich Merz argues the assets will "enable Ukraine to defend itself effectively against subsequent Russian attacks".

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

The Belgian government is worried it will be burdened by an huge bill if it all fails, and Euroclear head Valérie Urbain says using the assets could "undermine the international financial system".

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

The leader of Belgium Bart de Wever has set the EU a series of "pragmatic, fair, and legitimate conditions" before he will agree to the reparations plan, and he has refused to rule out legal action if it "presents significant risks" for his country.

The Details of the EU's Proposal?

Brussels is under pressure ahead of next Thursday's summit to come up with a solution that Belgium can support.

So far the EU has held off touching the frozen capital directly but since last year has paid the "excess income" from them to Ukraine. In 2024 that amounted to €3.7bn. From a legal standpoint, using the profits is deemed less risky as Russia is sanctioned and the returns are not property of the Russian state.

But foreign defense assistance for Ukraine has declined sharply in 2025, and Europe has struggled to make up the deficit caused by the US decision to all but stop funding Ukraine under President Donald Trump.

There are currently two EU proposals seeking to supplying Ukraine with €90bn, to cover two-thirds of its financial requirements.

• One is to raise the money 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 challenging when two member states oppose funding Ukraine's military.
• That leaves providing a loan of Ukraine cash from the Moscow's immobilized capital, which were initially held in securities but have now largely been converted into cash. That capital is an asset of Euroclear located within the European Central Bank.

Brussels' executive arm accepts Belgium has valid worries and says it is convinced it has dealt with them.

The plan is for Belgium to be shielded 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 clearing house which are in the EU.

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

In a key development, EU ambassadors are expected to agree on Friday to immobilise Russia's central bank assets held in Europe for the foreseeable future.

Heretofore they have had to vote by consensus every six months to extend the freeze, which could have meant a ongoing risk to Belgium.

The EU ambassadors are set to use an special provision under Article 122 of the EU Treaties so the assets remain frozen as long as an "clear risk to the financial well-being of the union" continues.

Why Belgium is Remains Satisfied

Brussels is firm it remains a strong supporter of Ukraine, but sees regulatory pitfalls in the plan and fears being forced to deal with the fallout if things do not work out.

A normally partisan political environment in this case has united behind Prime Minister Bart de Wever, who is facing pressure from fellow EU leaders.

"Belgium is a small economy. Belgian GDP is about €565bn – think about if it would need to bear a €185bn bill," notes Veerle Colaert, academic specializing in financial regulation at KU Leuven University.

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

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

"Lenders need to comply with prudential rules and shouldn't make one enormous loan. Now the EU is asking Euroclear to do exactly that.

"What is the purpose of these financial regulations? It's because we want banks to be solvent. And if things turn sour it would be up to Belgium to bail out Euroclear. That's a further cause why it's so crucial for Belgium to secure absolute guarantees for Euroclear."

EU Leaders 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 maintain the scheme involving immobilized capital is "the most financially feasible and politically achievable solution".

"This is a crucial test for us," states leading German conservative MP Norbert Röttgen. "If the plan collapses, I don't know what we'll do afterwards. That's why we have to finalize the deal in a week's time".

Although Russia is unyielding its money should not be accessed, there are further worries among European figures that the US may want to deploy Russia's immobilized billions for another purpose, as part of its own diplomatic proposal.

Zelensky has said Ukraine is in discussions with Europe and the US on a recovery fund, but he is also cognizant the US has been engaging with Russia about future co-operation.

An early draft of the US peace plan suggested $100bn of Russia's immobilized capital being used by the US for reconstruction, with the US {taking|receiving