Russia Retaliates at Europe's Scheme to Loan Immobilized Moscow's Cash to Ukraine

Ukraine is running out of financial resources to sustain its armed forces and economy afloat, after almost four years of the ongoing invasion by Moscow.

For Europe, the remedy to filling Ukraine's budget hole of €135.7bn for the next two years lies in frozen Russian assets held by Belgian bank Euroclear, and Brussels hope to give it the green light at their meeting in Brussels next week.

Russian officials state the EU plan would be an act of theft, and Russia's central bank stated on Friday it was initiating legal action against Euroclear in a Moscow court ahead of a definitive agreement is made.

'Only Fair' to Use Moscow's Funds, Assert Ukraine and the EU

In total, Russia has roughly €210bn of its funds blocked in the EU, and €185bn of that is held by Euroclear.

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

"It is appropriate that Moscow's blocked funds should be used to rebuild what Russia has devastated – and that that capital then becomes Ukraine's," says Ukraine's Volodymyr Zelensky.

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

Moscow's lawsuit was expected in Brussels. But it is not only Moscow that is dissatisfied.

Belgium is anxious it will be left with an huge bill if it all fails, and Euroclear CEO Valérie Urbain says using the assets could "destabilise the international financial system".

Euroclear also has an approximate €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 reconstruction loan scheme, and he has left open the possibility of legal action if it "presents significant risks" for his country.

What is the EU's Strategy?

European Union officials is under pressure before next Thursday's summit to agree on a solution that Belgium can agree to.

Previously the EU has avoided accessing the frozen capital directly but starting in 2024 has transferred the "extraordinary revenues" from them to Ukraine. In 2024 that amounted to €3.7bn. Juridically, using the revenue is deemed less risky as Russia is sanctioned and the returns are not property of the Russian state.

But foreign defense assistance for Ukraine has declined sharply in 2025, and Europe has found it difficult to compensate for the shortfall left by the US decision to virtually halt funding Ukraine under President Donald Trump.

There are at the moment two EU proposals seeking to providing Ukraine with €90bn, to finance two-thirds of its budgetary necessities.

• Option one is to borrow the funds on financial markets, guaranteed by the EU budget as a guarantee. This is Belgium's favored solution but it needs a consensus by EU leaders and that would be difficult when Budapest and Bratislava are against funding Ukraine's military.
• That leaves providing a loan of Ukraine cash from the Russian assets, which were originally held in securities but have now largely matured into cash. That funding is Euroclear property deposited at the European Central Bank.

The EU's executive accepts Belgium has justified fears and says it is assured it has dealt with them.

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

Should Euroclear face a financial hit of its own assets in Russia, that would be offset from assets belonging to Russia's own clearing house which are in the EU.

Should Russia took legal action against Belgium itself, any decision by a Russian court would not be enforced 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.

Previously they have had to vote all together every six months to extend the freeze, which could have meant a constant risk to Belgium.

The EU ambassadors are set to use an special provision 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

Brussels is insistent it remains a committed partner of Ukraine, but sees legal risks in the plan and fears being left to handle the consequences if things fail.

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

"The Belgian economy is not large. Belgian GDP is about €565bn – imagine if it would need to bear a €185bn bill," comments Veerle Colaert, professor of financial law at KU Leuven University.

Although the EU might be able to obtain adequate assurances for the loan itself, Belgium fears an added risk of being vulnerable to extra fines or liabilities.

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

"Financial institutions need to follow prudential rules and shouldn't concentrate risk. Now the EU is telling Euroclear to do just that.

"What is the purpose of these financial regulations? It's because we want banks to be secure. And if things turn sour it would be up to Belgium to save Euroclear. That's another reason why it's so vital for Belgium to secure water-tight assurances for Euroclear."

Europe Under Pressure from Every Direction

The situation is urgent, state several EU member states including those bordering Russia such as the Baltics, Finland and Poland. They believe the proposal to use Russian funds is "the most financially feasible and practically possible solution".

"This is a crucial test 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 finalize the deal in a week's time".

While Russia is unyielding its money should not be touched, there are additional apprehensions among EU officials that the US may want to use 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 engaging with Russia about potential collaboration.

An initial document 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