Russia Responds at the EU's Plan to Lend Frozen Moscow's Funds to Kyiv

Kyiv remains running out of funding to sustain its armed forces and economy afloat, after almost four years of Russia's full-scale war.

In the view of European leaders, the solution to plugging Kyiv's financial shortfall of €135.7bn for the coming 24 months rests with assets belonging to Russia that are frozen held by Belgian bank Euroclear, and EU leaders aim to finalize the plan at their EU leaders' conference next week.

Russian officials state the EU plan would be an illegal seizure, and the Central Bank of Russia declared on Friday it was initiating legal action against Euroclear in a Moscow court even before a definitive agreement is made.

'Appropriate' to Employ Russia's Funds, Say Ukraine and the EU

Overall, Russia has approximately €210bn of its state reserves frozen in the EU, and €185bn of that is held by Euroclear.

European and Ukrainian authorities argue that that capital should be used to restore what Russia has laid waste to: EU officials refers to it as a "reparations loan" and has proposed a plan to prop up Ukraine's economy amounting to €90bn.

"It is only just that Moscow's blocked funds should be used to rebuild what Russia has devastated – and that money then becomes Ukraine's," states Ukraine's Volodymyr Zelensky.

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

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

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

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

Belgium's PM Bart de Wever has set the EU a series of "pragmatic, fair, and legitimate conditions" before he will accept 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 Proposal?

Brussels is under pressure prior to next Thursday's summit to finalize a compromise that Belgium can accept.

Until now the EU has refrained from using the assets themselves directly but starting in 2024 has transferred the "extraordinary revenues" from them to Ukraine. In 2024 that amounted to €3.7bn. Legally, using the interest is considered safe as Russia is under sanction and the proceeds are not property of the Russian state.

But international military aid for Ukraine has fallen significantly in 2025, and Europe has found it difficult to cover the deficit caused by the US decision to all but stop funding Ukraine under President Donald Trump.

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

• Option one is to borrow the funds on the markets, secured against the EU budget as a guarantee. This is Belgium's favored solution but it demands a consensus by EU leaders and that would be problematic when two member states object to funding Ukraine's military.
• That leaves lending Ukraine cash from the Russian assets, which were at first held in bonds but have now largely been converted into cash. That funding is an asset of Euroclear held in the European Central Bank.

Brussels' executive arm recognizes Belgium has valid worries and states it is assured it has resolved them.

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

Should Euroclear incur losses of its own assets in Russia, the loss would be compensated from assets belonging to Russia's own clearing house which are in the EU.

If Russia took legal action against Belgium itself, any decision by a Russian court would not be enforced in the EU.

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

Heretofore they have had to vote unanimously every six months to continue the freeze, which could have meant a ongoing risk to Belgium.

The EU ambassadors are planning to use an emergency clause under Article 122 of the EU Treaties so the assets stay blocked as long as an "clear risk to the economic security of the union" continues.

Why Belgium is Not Yet Satisfied

Belgium is firm it remains a committed partner of Ukraine, but sees legal risks in the plan and is concerned about being left to handle the consequences if things fail.

A normally 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 – consider if it would need to carry a €185bn bill," notes Veerle Colaert, professor of financial law at KU Leuven University.

Although the EU might be able to obtain enough assurances for the loan itself, Belgium fears an further exposure of being exposed to extra fines or liabilities.

Prof Colaert also believes the stipulation for Euroclear to grant a loan to the EU would violate EU banking regulations.

"Financial institutions need to adhere to prudential rules and shouldn't make one enormous loan. 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 solvent. And if things go wrong it would be up to Belgium to save Euroclear. That's another reason why it's so important for Belgium to get water-tight protections for Euroclear."

The European Union Under Pressure from All Sides

Time is of the essence, warn a group of EU member states including those closest to Russia such as the Baltics, Finland and Poland. They maintain the proposal to use Russian funds is "a fiscally viable and politically realistic solution".

"It is a decisive moment for us," says 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 adamant its money should not be accessed, there are additional apprehensions among leaders in Europe that the US may want to use Russia's blocked funds for another purpose, as part of its own diplomatic proposal.

Zelensky has indicated Ukraine is coordinating with Europe and the US on a reconstruction fund, but he is also cognizant the US has been holding discussions with Russia about possible partnership.

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