Moscow Hits Back at Europe's Proposal to Loan Immobilized Russian Cash to Kyiv

Ukraine is facing a severe shortage of funding to keep going its military and economy afloat, after nearly four years of full-scale conflict with Russia.

In the view of European leaders, the remedy to plugging Ukraine's financial shortfall of €135.7bn for the next two years is found in assets belonging to Russia that are frozen located within Belgian bank Euroclear, and European Union officials hope to sign that off at their Brussels summit next week.

Russian officials warn the EU plan would be an illegal seizure, and Russia's central bank announced on Friday it was taking to court Euroclear in a Moscow court ahead of a conclusive plan is made.

'Just' to Use Moscow's Assets, Assert European and Ukrainian Officials

Overall, Russia has about €210bn of its funds frozen in the EU, and €185bn of that is in the custody of Euroclear.

Brussels and Kyiv argue that money should be used to rebuild what Russia has destroyed: The European Commission terms it a "loan for reparations" and has come up with a plan to prop up Ukraine's economy to the tune of €90bn.

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

German Chancellor Friedrich Merz states the assets will "allow Ukraine to protect itself effectively against future Russian attacks".

The legal move by Moscow was expected in Brussels. But it is not just Moscow that is unhappy.

Authorities in Brussels is worried it will be saddled with an massive bill if it all backfires, and Euroclear CEO Valérie Urbain says using the assets could "undermine the global financial architecture".

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

The leader of Belgium Bart de Wever has presented the EU with a series of "rational, reasonable, and justified conditions" before he will accept the reparations plan, and he has not excluded legal action if it "carries significant risks" for his country.

The Details of the EU's Proposal?

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

Until now the EU has avoided touching the principal funds directly but since last year has directed the "excess income" from them to Ukraine. In 2024 that was €3.7bn. Legally, using the profits is deemed less risky as Russia is under sanction and the returns are not Moscow's sovereign assets.

But international military aid for Ukraine has slipped dramatically in 2025, and Europe has found it difficult to compensate for the deficit caused by the US decision to virtually halt funding Ukraine under President Donald Trump.

There are presently two EU options seeking to providing Ukraine with €90bn, to pay for a majority of its funding needs.

• The first is to borrow the funds on the markets, guaranteed by the EU budget as a collateral. This is Belgium's preferred option but it needs a consensus by EU leaders and that would be problematic when Budapest and Bratislava object to funding Ukraine's military.
• That leaves providing a loan of Ukraine cash from the Russian assets, which were at first held in bonds but have now largely turned into cash. That funding is Euroclear property located within the European Central Bank.

Brussels' executive arm recognizes Belgium has valid worries and claims it is convinced it has dealt with them.

The proposal is for Belgium to be safeguarded with a assurance covering all the €210bn of Russian assets in the EU.

If Euroclear suffer a loss of its own assets in Russia, that would be offset from assets belonging to Russia's own clearing house which are in the EU.

Should Russia targeted Belgium itself, any ruling by a Russian court would not be accepted in the EU.

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

Previously they have had to vote all together every six months to extend the freeze, which could have meant a ongoing risk to Belgium.

The EU ambassadors are expected to use an special provision under Article 122 of the EU Treaties so the assets stay blocked as long as an "immediate threat to the economic security of the union" continues.

Why Belgium is Still Not Satisfied

The Belgian government is insistent it remains a strong supporter of Ukraine, but identifies regulatory pitfalls in the plan and fears being forced to deal with the fallout if things fail.

A typically 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 – consider if it would need to bear a €185bn bill," says Veerle Colaert, academic specializing in financial regulation at KU Leuven University.

While the EU might be able to secure sufficient guarantees for the loan itself, Belgium fears an additional danger of being subject to extra fines or liabilities.

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

"Financial institutions need to follow capital and liquidity requirements and shouldn't make one enormous loan. Now the EU is asking Euroclear to do exactly that.

"Why do we have these bank rules? It's because we want banks to be stable. And if things go wrong it would become the responsibility of Belgium to bail out Euroclear. That's a further cause why it's so crucial for Belgium to get water-tight assurances for Euroclear."

The European Union In a Difficult Position from All Sides

Time is of the essence, caution several EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They argue the proposal to use Russian funds is "the most fiscally viable and politically realistic solution".

"It's a matter of destiny 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 reach an agreement in a week's time".

While Russia is adamant its money should not be accessed, there are added concerns among EU officials that the US may want to deploy Russia's frozen billions for another purpose, as part of its own diplomatic proposal.

Zelensky has indicated Ukraine is coordinating with Europe and the US on a rebuilding fund, but he is also aware the US has been talking to Russia about potential collaboration.

An early draft 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