Moscow Retaliates at Europe's Proposal to Lend Frozen Russian Assets to Kyiv

Ukraine is depleting its financial resources to sustain its military and economy afloat, after close to 48 months of full-scale conflict with Russia.

From the EU's perspective, the answer to filling Kyiv's budget hole of €135.7bn for the coming 24 months lies in assets belonging to Russia that are frozen sitting in Belgian bank Euroclear, and European Union officials hope to sign that off at their EU leaders' conference next week.

Authorities in Russia state the EU plan would be an illegal seizure, and the Central Bank of Russia announced on Friday it was suing Euroclear in a Moscow court even before a conclusive plan is made.

'Only Fair' to Employ Moscow's Assets, Argue Ukraine and the EU

All told, Russia has approximately €210bn of its assets immobilized in the EU, and €185bn of that is managed by Euroclear.

European and Ukrainian authorities contend that that capital should be used to restore what Russia has devastated: EU officials terms it a "reparations loan" and has devised a plan to bolster Ukraine's economy amounting to €90bn.

"It is appropriate that Russia's frozen assets should be used to rebuild what Russia has devastated – and that that capital then becomes ours," remarks Ukrainian President Volodymyr Zelensky.

Germany's leader Friedrich Merz argues the assets will "help Ukraine to shield itself efficiently against any future Russian attacks".

Moscow's lawsuit was foreseen in Brussels. But it is not just Moscow that is unhappy.

Belgium is worried it will be left with an huge bill if it all fails, and Euroclear head Valérie Urbain argues using the assets could "destabilise the world's financial order".

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

The leader of Belgium Bart de Wever has given Brussels a series of "logical, sensible, and warranted conditions" before he will endorse the reparations plan, and he has left open the possibility of legal action if it "carries significant risks" for his country.

Explaining the EU's Proposal?

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

Previously the EU has refrained from touching the principal funds directly but starting in 2024 has transferred the "extraordinary revenues" from them to Ukraine. In 2024 that amounted to €3.7bn. Legally, using the revenue is considered less risky as Russia is under sanction and the returns are not property of the Russian state.

But international military aid for Ukraine has slipped dramatically in 2025, and Europe has struggled to make up the shortfall caused by the US decision to largely cease funding Ukraine under President Donald Trump.

There are currently two EU options designed to providing Ukraine with €90bn, to cover two-thirds of its financial requirements.

• The first is to secure the capital on the markets, backed by the EU budget as a surety. This is Belgium's preferred option but it demands a unanimous vote by EU leaders and that would be challenging when two member states oppose funding Ukraine's military.
• The alternative is providing a loan of Ukraine cash from the Russian assets, which were at first held in bonds but have now predominantly matured into cash. That money is owned by Euroclear located within the European Central Bank.

Brussels' executive arm acknowledges Belgium has valid worries and claims it is assured it has dealt with them.

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

If 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.

Should Russia targeted Belgium itself, any judgment by a Russian court would not be accepted in the EU.

In a significant move, EU ambassadors are expected to agree on Friday to permanently block Russia's central bank assets held in Europe for the foreseeable future.

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

The EU ambassadors are planning to use an emergency clause under Article 122 of the EU Treaties so the assets continue to be immobilized as long as an "direct danger to the financial well-being of the union" continues.

The Reasons Belgium is Not Yet Convinced

Belgium is adamant it remains a staunch ally of Ukraine, but perceives regulatory pitfalls in the plan and fears being forced to deal with the fallout if things go wrong.

A normally fractured political scene in this case has united behind Prime Minister Bart de Wever, who is facing pressure from European colleagues.

"Belgium is a small economy. Belgian GDP is about €565bn – consider if it would need to carry a €185bn bill," comments Veerle Colaert, professor of financial law at KU Leuven University.

Although the EU might be able to obtain sufficient assurances for the loan itself, Belgium worries about an additional danger of being subject to extra fines or liabilities.

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

"Financial institutions need to follow stability regulations 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 secure. And if things go wrong it would be up to Belgium to save Euroclear. That's another reason why it's so vital for Belgium to obtain water-tight protections for Euroclear."

Europe Under Pressure from Every Direction

There is no time to lose, state seven 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 practically possible solution".

"It is a decisive moment for us," says leading German conservative MP Norbert Röttgen. "If the plan collapses, I don't know what we'll do next. That's why we have to reach an agreement in a week's time".

While Russia is insistent its money should not be used, there are additional apprehensions among European figures that the US may want to deploy Russia's blocked funds in another way, as part of its own peace plan.

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

A preliminary version of the US peace plan mentioned $100bn of Russia's frozen assets being used by the US for reconstruction, with the US {taking|receiving