Russia Hits Back at the EU's Proposal to Loan Frozen Russian Cash to Kyiv

Ukraine is depleting its financial resources to keep going its armed forces and economy, after almost four years of full-scale conflict with Russia.

From the EU's perspective, the answer to filling Kyiv's funding gap of €135.7bn for the next two years lies in assets belonging to Russia that are frozen located within Belgian bank Euroclear, and Brussels hope to finalize the plan at their Brussels summit next week.

Moscow's representatives caution 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 Funds, Argue Kyiv and Brussels

In total, Russia has roughly €210bn of its assets immobilized in the EU, and €185bn of that is in the custody of Euroclear.

Brussels and Kyiv contend that those funds should be used to rebuild what Russia has destroyed: EU officials refers to it as a "loan for reparations" and has come up with a plan to support Ukraine's economy valued at €90bn.

"It is only just that Russia's frozen assets should be used to rebuild what Russia has devastated – and that money then becomes ours," remarks Ukraine's Volodymyr Zelensky.

Chancellor Friedrich Merz says the assets will "allow Ukraine to protect itself efficiently against subsequent Russian attacks".

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

The Belgian government is anxious it will be saddled with an huge bill if it all goes wrong, and Euroclear CEO Valérie Urbain warns using the assets could "undermine the world's financial order".

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

Belgian Prime Minister Bart de Wever has given Brussels a series of "pragmatic, fair, and legitimate 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 racing against time before next Thursday's summit to agree on a arrangement that Belgium can accept.

Until now the EU has avoided using the assets themselves directly but since last year has directed the "windfall profits" from them to Ukraine. In 2024 that amounted to €3.7bn. From a legal standpoint, using the interest is seen as safe as Russia is under sanction and the proceeds are not property of the Russian state.

But foreign defense assistance for Ukraine has declined sharply in 2025, and Europe has struggled to cover the gap resulting from the US decision to all but stop funding Ukraine under President Donald Trump.

There are currently two EU proposals designed to supplying Ukraine with €90bn, to cover two-thirds of its budgetary necessities.

• One is to secure the capital on capital markets, backed by the EU budget as a collateral. This is Belgium's preferred option but it requires a unanimous vote by EU leaders and that would be problematic when two member states object to funding Ukraine's military.
• This makes the other option lending Ukraine cash from the frozen Russian funds, which were originally held in bonds but have now largely turned into cash. That capital is owned by Euroclear located within the European Central Bank.

Brussels' executive arm recognizes Belgium has justified fears and says it is assured it has resolved them.

The scheme is for Belgium to be safeguarded with a insurance 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 settlement agency which are in the EU.

If Russia went after Belgium itself, any decision by a Russian court would not be accepted in the EU.

In a key development, EU ambassadors are poised to endorse on Friday to immobilise Russia's central bank assets held in Europe indefinitely.

Previously they have had to vote unanimously 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 stay blocked as long as an "direct danger to the financial well-being of the union" continues.

Why Belgium is Remains Satisfied

The Belgian government is insistent it remains a strong supporter of Ukraine, but perceives legal risks in the plan and worries about being shouldering the fallout if things fail.

A usually fractured political scene in this case has come together in support of Prime Minister Bart de Wever, who is facing pressure from fellow EU leaders.

"Belgium is a small economy. Belgian GDP is around €565bn – think about if it would need to carry a €185bn bill," notes Veerle Colaert, academic specializing in financial regulation at KU Leuven University.

While the EU might be able to arrange sufficient guarantees for the loan itself, Belgium worries about an further exposure of being subject 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.

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

"Why do we have these banking laws? It's because we want banks to be stable. And if things turn sour it would fall to Belgium to bail out Euroclear. That's another reason why it's so vital for Belgium to get ironclad protections for Euroclear."

Europe Facing Strain from Multiple Fronts

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

"It's a matter of destiny for us," states 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 finalize the deal in a week's time".

Although Russia is unyielding its money should not be accessed, there are added concerns among European figures that the US may want to deploy Russia's blocked funds for another purpose, as part of its own peace initiative.

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

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