Moscow Retaliates at the EU's Proposal to Loan Immobilized Russian Cash to Kyiv

Kyiv remains facing a severe shortage of financial resources to keep going its military and economy, after nearly four years of Russia's full-scale war.

From the EU's perspective, the answer to filling Kyiv's budget hole of €135.7bn for the next two years lies in Moscow's immobilized funds held by Belgian bank Euroclear, and EU leaders hope to give it the green light at their EU leaders' conference next week.

Authorities in Russia state the EU plan would be an confiscation, and the Central Bank of Russia stated on Friday it was initiating legal action against Euroclear in a Moscow court prior to a conclusive plan is made.

'Appropriate' to Employ Moscow's Assets, Say European and Ukrainian Officials

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

European and Ukrainian authorities contend that those funds should be used to restore what Russia has destroyed: The European Commission refers to it as a "reparations loan" and has come up with a plan to prop up Ukraine's economy amounting to €90bn.

"It is appropriate that Moscow's blocked funds should be used to rebuild what Russia has devastated – and that those funds then becomes ours," says Ukrainian President Volodymyr Zelensky.

Germany's leader Friedrich Merz argues the assets will "help Ukraine to shield itself successfully against future Russian attacks".

The legal move by Moscow was expected in Brussels. But it is not only Moscow that is concerned.

Authorities in Brussels is concerned it will be burdened by an enormous bill if it all backfires, and Euroclear head Valérie Urbain argues using the assets could "undermine the world's financial order".

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

The leader of Belgium Bart de Wever has given Brussels a series of "logical, sensible, and warranted 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.

The Details of the EU's Strategy?

European Union officials is racing against time before next Thursday's summit to agree on a arrangement that Belgium can accept.

Previously the EU has refrained from using the assets themselves directly but starting in 2024 has paid the "windfall profits" from them to Ukraine. In 2024 that totaled €3.7bn. Legally, using the interest is seen as less risky as Russia is sanctioned and the returns are not Moscow's sovereign assets.

But foreign defense assistance for Ukraine has fallen significantly in 2025, and Europe has had trouble trying to compensate for the deficit left by the US decision to all but stop funding Ukraine under President Donald Trump.

There are currently two EU options seeking to supplying Ukraine with €90bn, to finance a large portion of its financial requirements.

• One is to raise the money on the markets, secured against the EU budget as a collateral. This is Belgium's preferred option but it needs a agreement by all by EU leaders and that would be challenging when Budapest and Bratislava oppose funding Ukraine's military.
• That leaves providing a loan of Ukraine cash from the frozen Russian funds, which were at first held in financial instruments but have now predominantly turned into cash. That capital is an asset of Euroclear held in the European Central Bank.

The EU's executive accepts Belgium has legitimate concerns and claims it is assured it has resolved them.

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

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

Should Russia went after Belgium itself, any ruling by a Russian court would not be enforced in the EU.

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

Until now 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 planning 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.

The Reasons Belgium is Not Yet On Board

Belgium is firm it remains a strong supporter of Ukraine, but identifies legal risks in the plan and fears being left to handle the repercussions if things go wrong.

A typically 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 approximately €565bn – imagine if it would need to shoulder a €185bn bill," says Veerle Colaert, academic specializing in financial regulation 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 vulnerable to extra fines or liabilities.

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

"Financial institutions need to follow prudential rules and shouldn't concentrate risk. Now the EU is telling Euroclear to do exactly that.

"Why do we have these banking laws? It's because we want banks to be secure. And if things turn sour it would fall to Belgium to rescue Euroclear. That's a further cause why it's so important for Belgium to get absolute assurances for Euroclear."

Europe Under Pressure from Every Direction

The situation is urgent, warn a group of EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They believe the scheme involving immobilized capital is "the economically realistic and practically possible solution".

"It's a matter of destiny for us," warns leading German conservative MP Norbert Röttgen. "If we fail, I don't know what we'll do next. That's why we have to reach an agreement in a week's time".

While Russia is insistent its money should not be accessed, there are added concerns among European figures that the US may want to deploy Russia's blocked funds for another purpose, as part of its own peace initiative.

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

A preliminary version of the US peace plan suggested $100bn of Russia's immobilized capital being used by the US for reconstruction, with the US {taking|receiving