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

Ukraine is running out of funding to keep going its armed forces and economy afloat, after close to 48 months of the ongoing invasion by Moscow.

From the EU's perspective, the answer to addressing Kyiv's financial shortfall of €135.7bn for the coming 24 months lies in Moscow's immobilized funds located within Belgian bank Euroclear, and Brussels hope to finalize the plan at their EU leaders' conference next week.

Authorities in Russia caution the EU plan would be an act of theft, and the Central Bank of Russia stated on Friday it was initiating legal action against Euroclear in a Moscow court even before a conclusive plan is made.

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

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

The EU and Ukraine contend that that capital should be used to rebuild what Russia has laid waste to: Brussels calls it a "reconstruction loan" and has come up with a plan to prop up Ukraine's economy valued at €90bn.

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

Germany's leader Friedrich Merz says the assets will "allow Ukraine to protect itself effectively against future Russian attacks".

The legal move by Moscow was anticipated in Brussels. But it is not just Moscow that is dissatisfied.

Belgium is anxious it will be left with an huge bill if it all backfires, and Euroclear CEO Valérie Urbain warns using the assets could "undermine the global financial architecture".

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

The leader of Belgium Bart de Wever has presented the EU with a series of "logical, sensible, and warranted conditions" before he will endorse the reconstruction loan scheme, and he has refused to rule out legal action if it "carries significant risks" for his country.

What is the EU's Plan?

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

So far the EU has held off using the frozen capital directly but for the past year has directed the "extraordinary revenues" from them to Ukraine. In 2024 that totaled €3.7bn. Legally, using the profits is deemed permissible as Russia is under sanction and the returns are not property of the Russian state.

But international military aid for Ukraine has declined sharply in 2025, and Europe has had trouble trying to cover the gap caused by the US decision to virtually halt funding Ukraine under President Donald Trump.

There are currently two EU plans seeking to supplying Ukraine with €90bn, to finance two-thirds of its financial requirements.

• The first is to secure the capital on financial markets, secured against the EU budget as a guarantee. This is Belgium's preferred option but it demands a unanimous vote by EU leaders and that would be difficult when Budapest and Bratislava object to funding Ukraine's military.
• The alternative is providing a loan of Ukraine cash from the frozen Russian funds, which were initially held in financial instruments but have now predominantly been converted into cash. That funding is owned by Euroclear located within the European Central Bank.

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

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

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

If 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 poised to endorse on Friday to freeze indefinitely Russia's central bank assets held in Europe for the foreseeable future.

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

The EU ambassadors are expected to use an extraordinary measure under Article 122 of the EU Treaties so the assets remain frozen as long as an "immediate threat to the financial well-being of the union" continues.

The Reasons Belgium is Still Not Convinced

The Belgian government is firm it remains a staunch ally of Ukraine, but perceives regulatory pitfalls in the plan and is concerned about being left to handle the consequences if things go wrong.

A typically partisan political environment in this case has rallied behind Prime Minister Bart de Wever, who is being pressured from European colleagues.

"Belgium is a small economy. Belgian GDP is approximately €565bn – imagine if it would need to shoulder a €185bn bill," comments Veerle Colaert, expert in financial law at KU Leuven University.

While the EU might be able to secure adequate protections for the loan itself, Belgium fears an added risk of being subject to extra legal costs.

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

"Lenders need to adhere to prudential rules and shouldn't put all their eggs in one basket. 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 solvent. And if things fail it would be up to Belgium to rescue Euroclear. That's an additional reason why it's so important for Belgium to get ironclad assurances for Euroclear."

EU Leaders Facing Strain from Every Direction

There is no time to lose, caution seven EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They argue the frozen assets plan is "the fiscally viable and practically possible solution".

"It is a decisive moment for us," says leading German conservative MP Norbert Röttgen. "If we fail, I don't know what we'll do afterwards. That's why we have to succeed in a week's time".

Although Russia is insistent its money should not be accessed, there are added concerns among leaders in Europe that the US may want to use Russia's frozen billions differently, as part of its own peace plan.

Zelensky has stated 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 potential collaboration.

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