Moscow Hits Back at Europe's Plan to Lend Frozen Russian Funds to Ukraine

Ukraine is running out of funding to sustain its armed forces and economy afloat, after close to 48 months of Russia's full-scale war.

From the EU's perspective, the answer to addressing Kyiv's financial shortfall of €135.7bn for the next two years lies in Moscow's immobilized funds located within Belgian bank Euroclear, and Brussels aim to finalize the plan at their Brussels summit next week.

Authorities in Russia state the EU plan would be an act of theft, and the Central Bank of Russia declared on Friday it was initiating legal action against Euroclear in a Moscow court even before a final decision is made.

'Just' to Utilize Moscow's Assets, Assert Ukraine and the EU

All told, Russia has approximately €210bn of its funds frozen in the EU, and €185bn of that is held by Euroclear.

The EU and Ukraine argue that those funds should be used to rebuild what Russia has devastated: Brussels refers to it as a "loan for reparations" and has devised a plan to support Ukraine's economy valued at €90bn.

"It is only just that the assets frozen from Russia should be used to rebuild what Russia has destroyed – and that money then becomes Ukraine's," remarks Ukrainian President Volodymyr Zelensky.

German Chancellor Friedrich Merz says the assets will "enable Ukraine to protect itself successfully against subsequent Russian attacks".

Moscow's lawsuit was expected in Brussels. But it is not just Moscow that is unhappy.

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

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

Belgium's PM Bart de Wever has given Brussels a series of "rational, reasonable, and justified conditions" before he will agree to the reparations plan, and he has not excluded legal action if it "carries significant risks" for his country.

The Details of the EU's Plan?

Brussels is working to the wire ahead of next Thursday's summit to agree on a arrangement that Belgium can accept.

Previously the EU has held off touching the principal funds directly but starting in 2024 has paid the "extraordinary revenues" from them to Ukraine. In 2024 that was €3.7bn. From a legal standpoint, using the profits is seen as safe as Russia is sanctioned and the earnings are not Moscow's sovereign assets.

But foreign defense assistance for Ukraine has declined sharply in 2025, and Europe has found it difficult to cover the deficit resulting from the US decision to largely cease funding Ukraine under President Donald Trump.

There are presently two EU plans aimed at supplying Ukraine with €90bn, to finance a large portion of its funding needs.

• The first is to secure the capital on financial markets, secured against the EU budget as a guarantee. This is Belgium's favored solution but it requires a agreement by all by EU leaders and that would be challenging when two member states oppose funding Ukraine's military.
• This makes the other option lending Ukraine cash from the Russian assets, which were at first held in bonds but have now predominantly been converted into cash. That capital is Euroclear property deposited at the European Central Bank.

The European Commission accepts Belgium has justified fears and says it is convinced it has dealt with them.

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

If Euroclear face a financial hit of its own assets in Russia, the loss would be compensated from assets belonging to Russia's own clearing house which are in the EU.

In the event that Russia went after Belgium itself, any decision by a Russian court would not be recognized in the EU.

In a key development, EU ambassadors are poised to endorse on Friday to immobilise Russia's central bank assets held in Europe for the foreseeable future.

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

The EU ambassadors are planning to use an special provision under Article 122 of the EU Treaties so the assets continue to be immobilized as long as an "clear risk to the economic security of the union" continues.

Why Belgium is Not Yet Convinced

Brussels is firm it remains a strong supporter of Ukraine, but perceives legal risks in the plan and fears 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 being pressured from fellow EU leaders.

"The Belgian economy is not large. Belgian GDP is around €565bn – think about if it would need to bear a €185bn bill," says Veerle Colaert, expert in financial law at KU Leuven University.

Although the EU might be able to obtain enough assurances for the loan itself, Belgium is concerned about an additional danger of being vulnerable to extra fines or liabilities.

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

"Lenders need to follow prudential rules and shouldn't concentrate risk. Now the EU is asking Euroclear to do just that.

"What is the purpose of these financial regulations? It's because we want banks to be stable. And if things fail it would fall to Belgium to save Euroclear. That's another reason why it's so vital for Belgium to get ironclad guarantees for Euroclear."

The European Union Under Pressure from All Sides

There is no time to lose, caution a group of EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They maintain the frozen assets plan is "the most financially feasible and politically realistic solution".

"It is a decisive moment for us," says leading German conservative MP Norbert Röttgen. "If the plan collapses, I don't know what we'll do afterwards. That's why we have to succeed in a week's time".

While Russia is adamant its money should not be touched, there are added concerns among leaders in Europe that the US may want to deploy Russia's blocked funds for another purpose, as part of its own diplomatic proposal.

Zelensky has said Ukraine is working with Europe and the US on a rebuilding fund, but he is also mindful the US has been engaging with Russia about potential collaboration.

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