Moscow Hits Back at Europe's Proposal to Loan Frozen Moscow's Funds to Ukraine

Ukraine is depleting its financial resources to maintain its military and economy afloat, after nearly four years of full-scale conflict with Russia.

From the EU's perspective, the solution to addressing Kyiv's budget hole of €135.7bn for the following biennium lies in frozen Russian assets sitting in Belgian bank Euroclear, and European Union officials hope to give it the green light at their meeting in Brussels next week.

Russian officials state the EU plan would be an confiscation, and Moscow's monetary authority announced on Friday it was initiating legal action against Euroclear in a Moscow court prior to a final decision is made.

'Appropriate' to Utilize Moscow's Funds, Say Kyiv and Brussels

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

European and Ukrainian authorities argue that that capital should be used to restore what Russia has destroyed: The European Commission calls it a "reparations loan" and has devised a plan to support Ukraine's economy amounting to €90bn.

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

German Chancellor Friedrich Merz says the assets will "help Ukraine to protect itself successfully against any future Russian attacks".

Moscow's lawsuit was anticipated in Brussels. But it is not only Moscow that is concerned.

Belgium is concerned it will be left with an huge bill if it all backfires, and Euroclear head Valérie Urbain says using the assets could "disrupt the world's financial order".

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

The leader of Belgium Bart de Wever has set the EU a series of "rational, reasonable, and justified conditions" before he will endorse the reconstruction loan scheme, and he has refused to rule out legal action if it "carries significant risks" for his country.

Explaining the EU's Proposal?

The EU is racing against time ahead of next Thursday's summit to come up with a solution that Belgium can support.

So far the EU has avoided accessing the frozen capital directly but for the past year has transferred the "windfall profits" from them to Ukraine. In 2024 that was €3.7bn. From a legal standpoint, using the profits is considered safe as Russia is sanctioned and the proceeds are not property of the Russian state.

But international military aid for Ukraine has declined sharply in 2025, and Europe has struggled to cover the deficit left by the US decision to largely cease funding Ukraine under President Donald Trump.

There are at the moment two EU options aimed at furnishing Ukraine with €90bn, to pay for a majority of its funding needs.

• The first is to raise the money on the markets, backed by the EU budget as a surety. This is Belgium's favored solution but it demands a unanimous vote by EU leaders and that would be problematic when Budapest and Bratislava oppose funding Ukraine's military.
• That leaves loaning Ukraine cash from the frozen Russian funds, which were initially held in financial instruments but have now largely been converted into cash. That capital is an asset of Euroclear located within the European Central Bank.

The European Commission acknowledges Belgium has legitimate concerns and states it is convinced it has dealt with them.

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

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

As an important step, EU ambassadors are expected to agree on Friday to permanently block Russia's central bank assets held in Europe permanently.

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 special provision under Article 122 of the EU Treaties so the assets remain frozen as long as an "clear risk to the economic security of the union" continues.

The Reasons Belgium is Still Not Convinced

Belgium is firm it remains a staunch ally of Ukraine, but perceives legal risks in the plan and worries about being shouldering the fallout if things go wrong.

A typically partisan political environment in this case has come together in support of Prime Minister Bart de Wever, who is facing pressure from fellow EU leaders.

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

While the EU might be able to arrange adequate protections for the loan itself, Belgium is concerned about an additional danger of being exposed to extra damages or penalties.

Prof Colaert also contends the demand for Euroclear to issue credit to the EU would breach EU banking regulations.

"Banks need to comply with capital and liquidity requirements and shouldn't concentrate risk. Now the EU is telling Euroclear to do just that.

"What is the purpose of these financial regulations? It's because we want banks to be secure. And if things go wrong it would become the responsibility of Belgium to rescue Euroclear. That's an additional reason why it's so important for Belgium to get water-tight assurances for Euroclear."

Europe Facing Strain from Multiple Fronts

There is no time to lose, caution seven EU member states including those closest to Russia such as the Baltics, Finland and Poland. They maintain the frozen assets plan is "the financially feasible and politically achievable solution".

"This is a crucial test for us," warns 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".

Although Russia is insistent its money should not be used, there are further worries among EU officials that the US may want to employ Russia's frozen billions in another way, as part of its own peace initiative.

Zelensky has stated Ukraine is coordinating with Europe and the US on a rebuilding fund, but he is also cognizant the US has been talking to Russia about potential collaboration.

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