Russia Retaliates at the EU's Plan to Loan Frozen Russian Funds to Ukraine

Ukraine is running out of cash to sustain its military and economy, after close to 48 months of full-scale conflict with Russia.

From the EU's perspective, the remedy to addressing Ukraine's budget hole of €135.7bn for the coming 24 months rests with Moscow's immobilized funds held by Belgian bank Euroclear, and European Union officials seek to sign that off at their meeting in Brussels next week.

Authorities in Russia state the EU plan would be an act of theft, and Russia's central bank stated on Friday it was initiating legal action against Euroclear in a Moscow court ahead of a definitive agreement is made.

'Only Fair' to Employ Russia's Funds, Say Kyiv and Brussels

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

The EU and Ukraine argue that money should be used to reconstruct what Russia has laid waste to: The European Commission calls it a "reparations loan" and has proposed a plan to prop up Ukraine's economy valued at €90bn.

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

Germany's leader Friedrich Merz argues the assets will "allow Ukraine to shield itself efficiently against subsequent Russian attacks".

Moscow's lawsuit was expected in Brussels. But it is not just Moscow that is concerned.

Authorities in Brussels is concerned it will be left with an huge bill if it all goes wrong, and Euroclear CEO Valérie Urbain argues using the assets could "destabilise 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 "pragmatic, fair, and legitimate conditions" before he will agree to the reconstruction loan scheme, and he has left open the possibility of legal action if it "presents significant risks" for his country.

Explaining the EU's Plan?

European Union officials is racing against time prior to next Thursday's summit to finalize a solution that Belgium can support.

So far the EU has refrained from touching the assets themselves directly but since last year has transferred the "excess income" from them to Ukraine. In 2024 that totaled €3.7bn. Juridically, using the interest is considered permissible as Russia is under sanction and the proceeds are not Russian sovereign property.

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

There are at the moment two EU proposals designed to providing Ukraine with €90bn, to pay for a large portion of its funding needs.

• The first is to borrow the funds on financial markets, guaranteed by the EU budget as a collateral. This is Belgium's favored solution but it requires a agreement by all by EU leaders and that would be challenging when Budapest and Bratislava are against 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 largely turned into cash. That money is owned by Euroclear deposited at the European Central Bank.

The EU's executive acknowledges Belgium has justified fears and says it is assured it has dealt with them.

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

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

In the event that Russia took legal action against Belgium itself, any ruling by a Russian court would not be enforced in the EU.

As an important step, EU ambassadors are expected to agree on Friday to immobilise 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 repeated risk to Belgium.

The EU ambassadors are expected to use an emergency clause under Article 122 of the EU Treaties so the assets stay blocked as long as an "immediate threat to the financial well-being of the union" continues.

Why Belgium is Not Yet Convinced

The Belgian government is firm it remains a committed partner of Ukraine, but identifies legal risks in the plan and is concerned about being left to handle the fallout if things do not work out.

A normally divided political landscape in this case has united behind Prime Minister Bart de Wever, who is being pressured from European colleagues.

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

While the EU might be able to arrange sufficient assurances for the loan itself, Belgium fears an additional danger of being subject to extra legal costs.

Prof Colaert also believes the stipulation for Euroclear to issue credit to the EU would breach EU banking regulations.

"Banks need to adhere to stability regulations and shouldn't make one enormous loan. Now the EU is asking Euroclear to do precisely that.

"What is the purpose of 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 another reason why it's so vital for Belgium to secure water-tight assurances for Euroclear."

The European Union Facing Strain from All Sides

Time is of the essence, warn a group of EU member states including those bordering Russia such as the Baltics, Finland and Poland. They maintain the scheme involving immobilized capital is "a financially feasible and politically achievable solution".

"It is a decisive moment for us," states 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 reach an agreement in a week's time".

Although Russia is adamant its money should not be used, there are additional apprehensions among EU officials that the US may want to deploy Russia's immobilized billions for another purpose, as part of its own peace initiative.

Zelensky has stated Ukraine is working with Europe and the US on a reconstruction fund, but he is also cognizant the US has been holding discussions with Russia about possible partnership.

An initial document of the US peace plan suggested $100bn of Russia's blocked funds being used by the US for reconstruction, with the US {taking|receiving