Russia Hits Back at the EU's Plan to Loan Immobilized Moscow's Funds to Kyiv

Ukraine is running out of cash to sustain its armed forces and economy afloat, after nearly four years of Russia's full-scale war.

From the EU's perspective, the remedy to filling Ukraine's budget hole of €135.7bn for the next two years lies in frozen Russian assets sitting in Belgian bank Euroclear, and European Union officials seek to give it the green light at their Brussels summit next week.

Russian officials state the EU plan would be an act of theft, and the Central Bank of Russia stated on Friday it was suing Euroclear in a Moscow court even before a conclusive plan is made.

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

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

Brussels and Kyiv maintain that those funds should be used to restore what Russia has destroyed: Brussels calls it a "reparations loan" and has devised a plan to bolster Ukraine's economy amounting to €90bn.

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

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

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

The Belgian government is concerned it will be left with an enormous bill if it all goes wrong, and Euroclear chief executive Valérie Urbain says using the assets could "undermine 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 agree to the reconstruction loan scheme, and he has left open the possibility of legal action if it "carries significant risks" for his country.

What is the EU's Strategy?

Brussels is working to the wire before next Thursday's summit to finalize a solution that Belgium can agree to.

Previously the EU has avoided using the principal funds directly but since last year has directed the "windfall profits" from them to Ukraine. In 2024 that totaled €3.7bn. Juridically, using the profits is seen as less risky as Russia is subject to sanctions and the proceeds are not Russian sovereign property.

But global military support for Ukraine has declined sharply in 2025, and Europe has struggled to cover the gap resulting from the US decision to virtually halt funding Ukraine under President Donald Trump.

There are presently two EU proposals aimed at furnishing Ukraine with €90bn, to finance two-thirds of its funding needs.

• Option one is to borrow the funds on financial markets, guaranteed by the EU budget as a surety. This is Belgium's preferred option but it needs a agreement by all by EU leaders and that would be challenging when Hungary and Slovakia oppose funding Ukraine's military.
• The alternative is providing a loan of Ukraine cash from the Russian assets, which were initially held in bonds but have now predominantly matured into cash. That capital is an asset of Euroclear located within the European Central Bank.

The EU's executive accepts Belgium has valid worries and claims it is confident it has addressed them.

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

Should Euroclear incur losses of its own assets in Russia, that would be offset from assets belonging to Russia's own settlement agency which are in the EU.

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

In a significant move, EU ambassadors are expected to agree on Friday to freeze indefinitely Russia's central bank assets held in Europe for the foreseeable future.

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

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

The Reasons Belgium is Still Not On Board

The Belgian government is insistent it remains a committed partner of Ukraine, but sees legal risks in the plan and is concerned about being shouldering the consequences if things do not work out.

A normally partisan political environment 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 – consider if it would need to carry a €185bn bill," notes Veerle Colaert, academic specializing in financial regulation at KU Leuven University.

Although the EU might be able to obtain enough guarantees for the loan itself, Belgium worries about an additional danger of being vulnerable to extra damages or penalties.

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

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

"Why do we have these financial regulations? It's because we want banks to be solvent. And if things go wrong 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 Facing Strain from Every Direction

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

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

Although Russia is insistent its money should not be used, there are further worries among leaders in Europe that the US may want to employ 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 engaging with Russia about possible partnership.

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