Russia Hits Back at the EU's Proposal to Loan Frozen Russian Funds to Ukraine

Ukraine is facing a severe shortage of cash to sustain its military and economy afloat, after nearly four years of the ongoing invasion by Moscow.

In the view of European leaders, the remedy to filling Kyiv's financial shortfall of €135.7bn for the following biennium is found in assets belonging to Russia that are frozen located within Belgian bank Euroclear, and EU leaders seek to finalize the plan at their Brussels summit next week.

Russian officials warn the EU plan would be an act of theft, and Russia's central bank declared on Friday it was taking to court Euroclear in a Moscow court even before a definitive agreement is made.

'Appropriate' to Use Russia's Funds, Say European and Ukrainian Officials

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

Brussels and Kyiv contend that money should be used to rebuild what Russia has destroyed: Brussels calls it a "loan for reparations" and has proposed a plan to bolster Ukraine's economy valued at €90bn.

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

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

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

The Belgian government is anxious it will be saddled with an huge bill if it all backfires, and Euroclear chief executive Valérie Urbain argues using the assets could "disrupt the world's financial order".

Euroclear also has an approximate €16-17bn immobilised 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 reparations plan, and he has refused to rule out legal action if it "carries significant risks" for his country.

The Details of the EU's Proposal?

European Union officials is working to the wire prior to next Thursday's summit to agree on a compromise that Belgium can accept.

Previously the EU has refrained from using the principal funds directly but for the past year has paid the "windfall profits" from them to Ukraine. In 2024 that was €3.7bn. Legally, using the profits is deemed safe as Russia is sanctioned and the proceeds are not Russian sovereign property.

But foreign defense assistance for Ukraine has fallen significantly in 2025, and Europe has struggled to compensate for the gap resulting from the US decision to virtually halt funding Ukraine under President Donald Trump.

There are presently two EU proposals designed to supplying Ukraine with €90bn, to cover a large portion of its budgetary necessities.

• One is to borrow the funds on the markets, backed by the EU budget as a surety. This is Belgium's preferred option but it requires a consensus by EU leaders and that would be difficult when two member states oppose funding Ukraine's military.
• This makes the other option providing a loan of Ukraine cash from the Moscow's immobilized capital, which were at first held in financial instruments but have now largely been converted into cash. That funding is Euroclear property held in the European Central Bank.

Brussels' executive arm recognizes Belgium has legitimate concerns and states it is convinced it has resolved them.

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

Should Euroclear face a financial hit of its own assets in Russia, the loss would be compensated 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 decision by a Russian court would not be recognized in the EU.

In a key development, EU ambassadors are set to approve on Friday to freeze indefinitely Russia's central bank assets held in Europe permanently.

Previously they have had to vote by consensus every six months to renew 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 continue to be immobilized as long as an "direct danger to the economic security of the union" continues.

Why Belgium is Still Not Satisfied

Brussels is insistent it remains a staunch ally of Ukraine, but sees legal risks in the plan and is concerned about being shouldering the fallout if things do not work out.

A normally partisan political environment in this case has united behind Prime Minister Bart de Wever, who is under pressure from other European officials.

"Belgium is a small economy. Belgian GDP is about €565bn – imagine if it would need to bear a €185bn bill," comments Veerle Colaert, expert in financial law at KU Leuven University.

Although the EU might be able to arrange sufficient assurances for the loan itself, Belgium fears an additional danger of being exposed to extra fines or liabilities.

Prof Colaert also argues the demand for Euroclear to issue credit to the EU would violate EU banking regulations.

"Financial institutions need to comply with stability regulations and shouldn't concentrate risk. Now the EU is asking Euroclear to do exactly that.

"What is the purpose of these financial regulations? It's because we want banks to be solvent. And if things fail it would fall to Belgium to bail out Euroclear. That's an additional reason why it's so important for Belgium to get absolute guarantees for Euroclear."

The European Union In a Difficult Position from All Sides

Time is of the essence, caution several EU member states including those closest to Russia such as the Baltics, Finland and Poland. They believe the scheme involving immobilized capital is "the financially feasible and politically realistic solution".

"This is a crucial test for us," states leading German conservative MP Norbert Röttgen. "If the plan collapses, I don't know what we'll do next. That's why we have to finalize the deal in a week's time".

Although Russia is adamant its money should not be touched, there are further worries among European figures that the US may want to use Russia's blocked funds for another purpose, as part of its own peace initiative.

Zelensky has indicated Ukraine is coordinating with Europe and the US on a reconstruction fund, but he is also aware the US has been holding discussions with Russia about future co-operation.

A preliminary version 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