Moscow Retaliates at Europe's Scheme to Loan Frozen Russian Cash to Kyiv

Ukraine is facing a severe shortage of cash to maintain its armed forces and economy afloat, after nearly four years of Russia's full-scale war.

In the view of European leaders, the solution to filling Kyiv's financial shortfall of €135.7bn for the coming 24 months lies in frozen Russian assets located within Belgian bank Euroclear, and Brussels hope to finalize the plan at their Brussels summit next week.

Russian officials warn the EU plan would be an confiscation, and Russia's central bank stated on Friday it was suing Euroclear in a Moscow court even before a conclusive plan is made.

'Just' to Employ Russia's Funds, Say European and Ukrainian Officials

In total, Russia has about €210bn of its funds immobilized in the EU, and €185bn of that is held by Euroclear.

The EU and Ukraine maintain that those funds should be used to reconstruct what Russia has devastated: Brussels refers to it as a "reconstruction loan" and has come up with 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 devastated – and that money then becomes Ukraine's," says Ukraine's Volodymyr Zelensky.

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

Russia's court action was anticipated in Brussels. But it is not only Moscow that is dissatisfied.

Belgium is concerned it will be saddled with an massive bill if it all backfires, and Euroclear head Valérie Urbain argues using the assets could "destabilise the global financial architecture".

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

Belgian Prime Minister Bart de Wever has set the EU a series of "rational, reasonable, and justified conditions" before he will endorse the reparations plan, and he has not excluded legal action if it "presents significant risks" for his country.

What is the EU's Strategy?

Brussels is working to the wire ahead of next Thursday's summit to come up with a compromise that Belgium can support.

Until now the EU has avoided accessing the assets themselves directly but since last year has paid the "windfall profits" from them to Ukraine. In 2024 that was €3.7bn. Legally, using the interest is deemed safe as Russia is subject to sanctions and the earnings are not property of the Russian state.

But international military aid for Ukraine has declined sharply in 2025, and Europe has struggled to make up the gap left by the US decision to largely cease funding Ukraine under President Donald Trump.

There are presently two EU plans designed to providing Ukraine with €90bn, to pay for a large portion of its budgetary necessities.

• The first is to secure the capital on the markets, guaranteed by the EU budget as a guarantee. This is Belgium's first choice but it requires a consensus by EU leaders and that would be challenging when two member states oppose funding Ukraine's military.
• That leaves lending Ukraine cash from the Moscow's immobilized capital, which were originally held in financial instruments but have now largely been converted into cash. That funding is an asset of Euroclear located within the European Central Bank.

Brussels' executive arm accepts Belgium has valid worries and claims it is convinced it has addressed them.

The plan is for Belgium to be shielded with a guarantee covering all the €210bn of Russian assets in the EU.

Should Euroclear suffer a loss of its own assets in Russia, the loss would be compensated from assets belonging to Russia's own settlement agency which are in the EU.

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

As an important step, 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 all together every six months to renew 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 continue to be immobilized as long as an "direct danger to the economic security of the union" continues.

Why Belgium is Still Not Convinced

Brussels is insistent it remains a staunch ally of Ukraine, but identifies legal risks in the plan and is concerned about being shouldering the fallout if things fail.

A typically divided political landscape in this case has rallied behind Prime Minister Bart de Wever, who is facing pressure from European colleagues.

"The Belgian economy is not large. 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 sufficient assurances for the loan itself, Belgium fears an further exposure of being exposed to extra fines or liabilities.

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

"Banks need to follow capital and liquidity requirements and shouldn't concentrate risk. Now the EU is instructing Euroclear to do exactly that.

"What is the purpose of these banking laws? It's because we want banks to be secure. And if things fail it would be up to Belgium to rescue Euroclear. That's another reason why it's so vital for Belgium to get water-tight guarantees for Euroclear."

Europe Facing Strain from Every Direction

Time is of the essence, warn seven EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They maintain the proposal to use Russian funds is "the financially feasible and politically realistic 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 finalize the deal in a week's time".

Although 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 in another way, as part of its own diplomatic proposal.

Zelensky has indicated Ukraine is working with Europe and the US on a reconstruction fund, but he is also aware the US has been holding discussions 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