Moscow Retaliates at the EU's Plan to Lend Frozen Moscow's Funds to Ukraine

Ukraine is running out of financial resources to sustain its armed forces and economy, after nearly four years of the ongoing invasion by Moscow.

In the view of European leaders, the solution to plugging Kyiv's funding gap of €135.7bn for the next two years lies in Moscow's immobilized funds held by Belgian bank Euroclear, and EU leaders seek to finalize the plan at their EU leaders' conference next week.

Authorities in Russia warn the EU plan would be an illegal seizure, and Moscow's monetary authority announced on Friday it was initiating legal action against Euroclear in a Moscow court even before a final decision is made.

'Only Fair' to Employ Moscow's Funds, Assert Kyiv and Brussels

All told, Russia has approximately €210bn of its assets immobilized in the EU, and €185bn of that is managed by Euroclear.

Brussels and Kyiv maintain that that capital should be used to rebuild what Russia has devastated: The European Commission calls it a "reconstruction loan" and has devised a plan to bolster Ukraine's economy amounting to €90bn.

"It is appropriate that Russia's frozen assets should be used to reconstruct what Russia has destroyed – and that those funds then becomes ours," states Ukraine's Volodymyr Zelensky.

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

The legal move by Moscow was foreseen in Brussels. But it is not just Moscow that is concerned.

The Belgian government is concerned it will be burdened by an enormous bill if it all goes wrong, and Euroclear head Valérie Urbain warns using the assets could "destabilise the international financial system".

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

Belgian Prime Minister Bart de Wever has presented the EU with a series of "logical, sensible, and warranted conditions" before he will agree to the reconstruction loan scheme, and he has refused to rule out legal action if it "poses significant risks" for his country.

The Details of the EU's Plan?

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

Previously the EU has avoided accessing the assets themselves directly but starting in 2024 has transferred the "extraordinary revenues" from them to Ukraine. In 2024 that amounted to €3.7bn. From a legal standpoint, using the interest is deemed permissible as Russia is under sanction and the proceeds are not Moscow's sovereign assets.

But foreign defense assistance for Ukraine has slipped dramatically in 2025, and Europe has struggled to compensate for the deficit resulting from 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 cover two-thirds of its financial requirements.

• Option one is to raise the money on the markets, guaranteed by the EU budget as a guarantee. This is Belgium's first choice but it requires a unanimous vote by EU leaders and that would be challenging when Hungary and Slovakia oppose funding Ukraine's military.
• That leaves lending Ukraine cash from the frozen Russian funds, which were originally held in bonds but have now predominantly turned into cash. That capital is Euroclear property deposited at the European Central Bank.

The European Commission acknowledges Belgium has justified fears and states it is confident it has dealt with them.

The proposal is for Belgium to be safeguarded with a insurance covering 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 clearing house which are in the EU.

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

Previously they have had to vote all together every six months to continue 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 continue to be immobilized as long as an "immediate threat to the economic interests of the union" continues.

The Reasons Belgium is Not Yet Satisfied

Brussels is insistent it remains a staunch ally 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 typically partisan political environment in this case has rallied behind Prime Minister Bart de Wever, who is being pressured from fellow EU leaders.

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

Although the EU might be able to secure enough protections for the loan itself, Belgium fears an additional danger 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.

"Lenders need to comply with prudential rules and shouldn't concentrate risk. Now the EU is instructing Euroclear to do precisely that.

"What is the purpose of these banking laws? It's because we want banks to be stable. And if things turn sour it would become the responsibility of Belgium to rescue Euroclear. That's another reason why it's so vital for Belgium to obtain water-tight protections for Euroclear."

Europe In a Difficult Position from Every Direction

There is no time to lose, warn a group of EU member states including those bordering Russia such as the Baltics, Finland and Poland. They argue the scheme involving immobilized capital is "a fiscally viable and practically possible solution".

"It is a decisive moment for us," states leading German conservative MP Norbert Röttgen. "Should we not succeed, I don't know what we'll do afterwards. 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 additional apprehensions among leaders in Europe that the US may want to use Russia's immobilized billions in another way, as part of its own peace initiative.

Zelensky has stated Ukraine is in discussions with Europe and the US on a reconstruction fund, but he is also mindful the US has been engaging with Russia about potential collaboration.

An early draft of the US peace plan referred to $100bn of Russia's frozen assets being used by the US for reconstruction, with the US {taking|receiving