Moscow Responds at Europe's Proposal to Loan Immobilized Russian Funds to Kyiv

Ukraine is running out of cash to keep going its armed forces and economy, after almost four years of full-scale conflict with Russia.

In the view of European leaders, the solution to plugging Ukraine's funding gap of €135.7bn for the following biennium rests with Moscow's immobilized funds sitting in Belgian bank Euroclear, and EU leaders seek to give it the green light at their EU leaders' conference next week.

Russian officials caution the EU plan would be an illegal seizure, and the Central Bank of Russia announced on Friday it was suing Euroclear in a Moscow court prior to a definitive agreement is made.

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

In total, Russia has approximately €210bn of its funds blocked in the EU, and €185bn of that is in the custody of Euroclear.

The EU and Ukraine argue that those funds should be used to rebuild what Russia has laid waste to: Brussels calls it a "reconstruction loan" and has devised a plan to support Ukraine's economy amounting to €90bn.

"It's only fair that Russia's frozen assets should be used to rebuild what Russia has devastated – and that those funds then becomes ours," remarks Ukrainian President Volodymyr Zelensky.

Chancellor Friedrich Merz states the assets will "help Ukraine to defend itself efficiently against subsequent Russian attacks".

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

Belgium is worried it will be saddled with an enormous bill if it all fails, and Euroclear chief executive Valérie Urbain says using the assets could "undermine the global financial architecture".

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

Belgian Prime Minister Bart de Wever has presented the EU with a series of "pragmatic, fair, and legitimate conditions" before he will accept the reparations plan, and he has refused to rule out legal action if it "presents significant risks" for his country.

The Details of the EU's Strategy?

European Union officials is working to the wire before next Thursday's summit to finalize a arrangement that Belgium can support.

Previously the EU has held off using the frozen capital directly but starting in 2024 has paid the "excess income" from them to Ukraine. In 2024 that amounted to €3.7bn. From a legal standpoint, using the interest is deemed safe as Russia is subject to sanctions and the returns are not Moscow's sovereign assets.

But international military aid for Ukraine has declined sharply in 2025, and Europe has found it difficult to cover the shortfall left by the US decision to all but stop funding Ukraine under President Donald Trump.

There are at the moment two EU plans seeking to supplying Ukraine with €90bn, to cover two-thirds of its funding needs.

• The first is to borrow the funds on capital markets, secured against the EU budget as a collateral. This is Belgium's favored solution but it needs a unanimous vote by EU leaders and that would be difficult when Hungary and Slovakia are against funding Ukraine's military.
• That leaves providing a loan of Ukraine cash from the frozen Russian funds, which were initially held in securities but have now mostly turned into cash. That funding is an asset of Euroclear located within the European Central Bank.

The European Commission recognizes Belgium has justified fears and says it is assured it has addressed them.

The proposal 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, that would be offset from assets belonging to Russia's own clearing house which are in the EU.

Should Russia took legal action against Belgium itself, any ruling by a Russian court would not be recognized in the EU.

As an important step, EU ambassadors are expected to agree on Friday to freeze indefinitely Russia's central bank assets held in Europe indefinitely.

Previously they have had to vote all together every six months to continue the freeze, which could have meant a repeated 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 financial well-being of the union" continues.

The Reasons Belgium is Remains On Board

Brussels is adamant it remains a committed partner of Ukraine, but perceives legal risks in the plan and is concerned about being shouldering the consequences if things fail.

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 has a modest-sized economy. Belgian GDP is around €565bn – think about if it would need to carry a €185bn bill," notes Veerle Colaert, expert in financial law at KU Leuven University.

While the EU might be able to obtain sufficient assurances for the loan itself, Belgium worries about an further exposure of being exposed to extra legal costs.

Prof Colaert also believes the requirement for Euroclear to issue credit to the EU would violate EU banking regulations.

"Banks need to follow capital and liquidity requirements and shouldn't put all their eggs in one basket. Now the EU is asking Euroclear to do precisely that.

"Why do we have these financial regulations? It's because we want banks to be solvent. And if things turn sour it would fall to Belgium to rescue Euroclear. That's an additional reason why it's so vital for Belgium to get absolute assurances for Euroclear."

EU Leaders In a Difficult Position from Every Direction

There is no time to lose, caution seven EU member states including those closest to Russia such as the Baltics, Finland and Poland. They argue the frozen assets plan is "the most financially feasible and politically achievable solution".

"It is a decisive moment for us," states leading German conservative MP Norbert Röttgen. "Should we not succeed, I don't know what we'll do subsequently. That's why we have to reach an agreement in a week's time".

Although Russia is adamant its money should not be accessed, there are additional apprehensions among EU officials that the US may want to use Russia's blocked funds in another way, as part of its own peace initiative.

Zelensky has stated Ukraine is working with Europe and the US on a reconstruction fund, but he is also cognizant the US has been talking to Russia about potential collaboration.

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