Russia Retaliates at Europe's Scheme to Lend Frozen Moscow's Assets to Ukraine

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

From the EU's perspective, the answer to filling Ukraine's funding gap of €135.7bn for the coming 24 months lies in assets belonging to Russia that are frozen held by Belgian bank Euroclear, and European Union officials hope to give it the green light at their EU leaders' conference next week.

Russian officials state the EU plan would be an illegal seizure, and Moscow's monetary authority announced on Friday it was taking to court Euroclear in a Moscow court ahead of a definitive agreement is made.

'Only Fair' to Utilize Russia's Funds, Assert Ukraine and the EU

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

Brussels and Kyiv maintain that that capital should be used to restore what Russia has destroyed: EU officials terms it a "reparations loan" and has proposed a plan to support 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 Ukraine's Volodymyr Zelensky.

Chancellor Friedrich Merz argues the assets will "enable Ukraine to shield itself successfully against subsequent Russian attacks".

Moscow's lawsuit was anticipated in Brussels. But it is not just Moscow that is dissatisfied.

Authorities in Brussels is anxious it will be burdened by an massive bill if it all fails, and Euroclear chief executive Valérie Urbain says using the assets could "disrupt the international financial system".

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

The leader of Belgium Bart de Wever has set the EU a series of "logical, sensible, and warranted conditions" before he will endorse the reparations plan, and he has not excluded legal action if it "carries significant risks" for his country.

Explaining the EU's Proposal?

Brussels is racing against time before next Thursday's summit to finalize a arrangement that Belgium can agree to.

Until now the EU has refrained from using the assets themselves directly but since last year has transferred the "excess income" from them to Ukraine. In 2024 that amounted to €3.7bn. From a legal standpoint, using the profits is deemed permissible as Russia is subject to sanctions and the proceeds are not Russian sovereign property.

But international military aid for Ukraine has slipped dramatically in 2025, and Europe has had trouble trying to make up the deficit resulting from the US decision to all but stop funding Ukraine under President Donald Trump.

There are currently two EU options designed to providing Ukraine with €90bn, to pay for two-thirds of its funding needs.

• The first is to borrow the funds on capital markets, guaranteed by the EU budget as a collateral. This is Belgium's first choice but it demands a consensus by EU leaders and that would be difficult when Budapest and Bratislava object to funding Ukraine's military.
• That leaves lending Ukraine cash from the frozen Russian funds, which were initially held in bonds but have now predominantly turned into cash. That money is Euroclear property deposited at the European Central Bank.

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

The plan is for Belgium to be protected with a assurance encompassing all the €210bn of Russian assets in the EU.

If 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 went after Belgium itself, any judgment by a Russian court would not be enforced in the EU.

As an important step, EU ambassadors are poised to endorse on Friday to freeze indefinitely Russia's central bank assets held in Europe permanently.

Previously they have had to vote unanimously every six months to renew the freeze, which could have meant a constant risk to Belgium.

The EU ambassadors are planning to use an special provision under Article 122 of the EU Treaties so the assets remain frozen as long as an "immediate threat to the economic interests of the union" continues.

The Reasons Belgium is Remains On Board

The Belgian government is adamant it remains a staunch ally of Ukraine, but identifies juridical dangers in the plan and fears being left to handle the repercussions if things go wrong.

A usually divided political landscape in this case has rallied behind Prime Minister Bart de Wever, who is being pressured from fellow EU leaders.

"The Belgian economy is not large. Belgian GDP is around €565bn – consider if it would need to bear a €185bn bill," notes Veerle Colaert, academic specializing in financial regulation at KU Leuven University.

While the EU might be able to obtain sufficient assurances for the loan itself, Belgium worries about an added risk of being vulnerable to extra legal costs.

Prof Colaert also contends the requirement for Euroclear to issue credit to the EU would violate EU banking regulations.

"Banks need to adhere to capital and liquidity requirements and shouldn't concentrate risk. Now the EU is asking Euroclear to do precisely that.

"Why do we have these banking laws? It's because we want banks to be secure. And if things turn sour it would be up to Belgium to save Euroclear. That's an additional reason why it's so vital for Belgium to secure ironclad guarantees for Euroclear."

Europe Facing Strain from All Sides

The situation is urgent, state several EU member states including those closest to Russia such as the Baltics, Finland and Poland. They maintain the proposal to use Russian funds is "the fiscally viable and politically realistic solution".

"It's a matter of destiny 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 finalize the deal in a week's time".

While Russia is insistent its money should not be used, there are further worries among European figures that the US may want to deploy Russia's blocked funds differently, as part of its own peace initiative.

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

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