Moscow Responds at the EU's Scheme to Lend Frozen Russian Funds to Ukraine

Ukraine is facing a severe shortage of financial resources to maintain its military and economy afloat, after almost four years of full-scale conflict with Russia.

For Europe, the remedy to addressing Kyiv's budget hole of €135.7bn for the coming 24 months lies in assets belonging to Russia that are frozen held by Belgian bank Euroclear, and Brussels seek to finalize the plan at their meeting in Brussels next week.

Russian officials caution the EU plan would be an confiscation, and the Central Bank of Russia stated on Friday it was taking to court Euroclear in a Moscow court even before a final decision is made.

'Only Fair' to Utilize Moscow's Funds, Argue Ukraine and the EU

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

The EU and Ukraine contend that that capital should be used to reconstruct what Russia has laid waste to: EU officials calls it a "reconstruction loan" and has come up with a plan to support Ukraine's economy to the tune of €90bn.

"It's only fair that Moscow's blocked funds should be used to reconstruct what Russia has destroyed – and that that capital then becomes ours," remarks Ukraine's Volodymyr Zelensky.

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

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

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

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

Belgian Prime Minister Bart de Wever has presented the EU with a series of "logical, sensible, and warranted conditions" before he will agree to the reconstruction loan scheme, and he has not excluded legal action if it "poses significant risks" for his country.

Explaining the EU's Strategy?

The EU is under pressure ahead of next Thursday's summit to come up with a arrangement that Belgium can agree to.

Previously the EU has avoided accessing the principal funds directly but for the past year has directed the "windfall profits" from them to Ukraine. In 2024 that was €3.7bn. Juridically, using the interest is considered less risky as Russia is sanctioned and the earnings are not Moscow's sovereign assets.

But international military aid for Ukraine has fallen significantly in 2025, and Europe has struggled to compensate for the gap caused by the US decision to all but stop funding Ukraine under President Donald Trump.

There are at the moment two EU proposals designed to providing Ukraine with €90bn, to cover a majority of its budgetary necessities.

• One is to secure the capital on capital markets, guaranteed by the EU budget as a guarantee. This is Belgium's preferred option but it needs a unanimous vote by EU leaders and that would be problematic when Hungary and Slovakia are against funding Ukraine's military.
• That leaves loaning Ukraine cash from the Russian assets, which were originally held in securities but have now predominantly matured into cash. That funding is an asset of Euroclear deposited at the European Central Bank.

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

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

Should Euroclear incur losses of its own assets in Russia, the shortfall would be covered from assets belonging to Russia's own settlement agency which are in the EU.

In the event that Russia took legal action against 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.

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 set 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.

The Reasons Belgium is Still Not On Board

Brussels is insistent it remains a strong supporter of Ukraine, but perceives regulatory pitfalls in the plan and worries about being left to handle the fallout if things fail.

A normally partisan political environment in this case has come together in support of Prime Minister Bart de Wever, who is under pressure from other European officials.

"Belgium has a modest-sized economy. Belgian GDP is about €565bn – imagine 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 arrange sufficient assurances for the loan itself, Belgium fears an further exposure of being exposed to extra fines or liabilities.

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

"Lenders need to adhere to stability regulations and shouldn't make one enormous loan. Now the EU is telling Euroclear to do just that.

"Why do we have these financial regulations? It's because we want banks to be stable. And if things turn sour it would fall to Belgium to rescue Euroclear. That's another reason why it's so crucial for Belgium to secure absolute guarantees for Euroclear."

The European Union In a Difficult Position from Multiple Fronts

Time is of the essence, state several EU member states including those bordering Russia such as the Baltics, Finland and Poland. They argue the proposal to use Russian funds is "a economically realistic and politically realistic 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 subsequently. That's why we have to reach an agreement in a week's time".

Although Russia is adamant its money should not be used, there are additional apprehensions among European figures that the US may want to employ Russia's immobilized billions differently, as part of its own peace initiative.

Zelensky has indicated Ukraine is in discussions with Europe and the US on a reconstruction fund, but he is also cognizant the US has been holding discussions with Russia about future co-operation.

A preliminary version 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