Russia Responds at Europe's Scheme to Lend Frozen Moscow's Funds to Ukraine

Ukraine is facing a severe shortage of funding to maintain its armed forces and economy, after nearly four years of Russia's full-scale war.

For Europe, the answer to filling Kyiv's financial shortfall of €135.7bn for the coming 24 months is found in frozen Russian assets sitting in Belgian bank Euroclear, and EU leaders seek to give it the green light at their meeting in Brussels next week.

Moscow's representatives state the EU plan would be an illegal seizure, and Russia's central bank stated on Friday it was taking to court Euroclear in a Moscow court even before a conclusive plan is made.

'Only Fair' to Use Russia's Funds, Assert European and Ukrainian Officials

In total, Russia has about €210bn of its assets blocked in the EU, and €185bn of that is managed by Euroclear.

Brussels and Kyiv contend that that capital should be used to reconstruct what Russia has devastated: Brussels calls it a "reparations loan" and has proposed a plan to prop up Ukraine's economy amounting to €90bn.

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

Chancellor Friedrich Merz argues the assets will "enable Ukraine to shield itself efficiently against any future Russian attacks".

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

Belgium is anxious it will be burdened by an enormous bill if it all fails, and Euroclear CEO Valérie Urbain warns using the assets could "undermine the global financial architecture".

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

Belgium's PM Bart de Wever has set the EU a series of "pragmatic, fair, and legitimate conditions" before he will accept the reconstruction loan scheme, and he has not excluded legal action if it "carries significant risks" for his country.

What is the EU's Strategy?

The EU is under pressure prior to next Thursday's summit to agree on a solution that Belgium can accept.

So far the EU has avoided accessing the frozen capital directly but for the past year has directed the "excess income" from them to Ukraine. In 2024 that was €3.7bn. From a legal standpoint, using the profits is considered safe 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 had trouble trying to make up the deficit left by the US decision to largely cease funding Ukraine under President Donald Trump.

There are currently two EU proposals seeking to supplying Ukraine with €90bn, to finance a large portion of its budgetary necessities.

• The first is to secure the capital on the markets, backed by the EU budget as a guarantee. This is Belgium's favored solution but it demands a unanimous vote by EU leaders and that would be difficult when Hungary and Slovakia object to funding Ukraine's military.
• That leaves lending Ukraine cash from the Russian assets, which were at first held in bonds but have now predominantly turned into cash. That funding is Euroclear property held in the European Central Bank.

Brussels' executive arm accepts Belgium has valid worries and states it is assured it has addressed them.

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

If Euroclear incur losses 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 targeted Belgium itself, any ruling by a Russian court would not be recognized in the EU.

In a significant move, EU ambassadors are set to approve on Friday to permanently block Russia's central bank assets held in Europe permanently.

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

The EU ambassadors are expected to use an extraordinary measure under Article 122 of the EU Treaties so the assets stay blocked as long as an "direct danger to the economic security of the union" continues.

Why Belgium is Still Not On Board

Brussels is insistent it remains a strong supporter of Ukraine, but perceives legal risks in the plan and fears being shouldering the consequences if things go wrong.

A usually fractured political scene 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 around €565bn – think about if it would need to carry a €185bn bill," says Veerle Colaert, professor of 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 further exposure of being vulnerable to extra legal costs.

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

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

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

Europe Under Pressure from Multiple Fronts

The situation is urgent, warn seven EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They believe the proposal to use Russian funds is "the most financially feasible and practically possible solution".

"It is a decisive moment 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".

While Russia is insistent its money should not be used, there are added concerns among EU officials that the US may want to deploy Russia's blocked funds for another purpose, 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 holding discussions with Russia about future co-operation.

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