Moscow Retaliates at Europe's Scheme to Lend Immobilized Moscow's Funds to Kyiv

Kyiv remains facing a severe shortage of financial resources to maintain its military and economy afloat, after almost four years of the ongoing invasion by Moscow.

For Europe, the remedy to addressing Ukraine's budget hole of €135.7bn for the following biennium is found in frozen Russian assets sitting in Belgian bank Euroclear, and EU leaders seek to finalize the plan at their meeting in Brussels next week.

Russian officials caution the EU plan would be an illegal seizure, and the Central Bank of Russia stated on Friday it was taking to court Euroclear in a Moscow court prior to a final decision is made.

'Just' to Utilize Moscow's Assets, Say Ukraine and the EU

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

Brussels and Kyiv contend that that capital should be used to restore what Russia has laid waste to: Brussels terms it a "reconstruction loan" and has come up with a plan to bolster Ukraine's economy to the tune of €90bn.

"It is only just that the assets frozen from Russia 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 shield itself efficiently against any future Russian attacks".

The legal move by Moscow was expected in Brussels. But it is not only Moscow that is unhappy.

Belgium is worried it will be saddled with an enormous bill if it all fails, and Euroclear head Valérie Urbain argues using the assets could "disrupt the global financial architecture".

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

The leader of Belgium Bart de Wever has set the EU a series of "rational, reasonable, and justified conditions" before he will accept the reconstruction loan scheme, and he has not excluded legal action if it "presents significant risks" for his country.

Explaining the EU's Plan?

European Union officials is under pressure prior to next Thursday's summit to come up with a compromise that Belgium can agree to.

Until now the EU has refrained from using the principal funds directly but starting in 2024 has transferred the "excess income" from them to Ukraine. In 2024 that amounted to €3.7bn. Legally, using the interest is deemed less risky as Russia is under sanction and the earnings are not Russian sovereign property.

But global military support for Ukraine has declined sharply in 2025, and Europe has had trouble trying to make up the shortfall resulting from the US decision to all but stop funding Ukraine under President Donald Trump.

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

• Option one is to raise the money on capital markets, secured against the EU budget as a collateral. This is Belgium's favored solution but it demands a agreement by all by EU leaders and that would be challenging when Hungary and Slovakia are against funding Ukraine's military.
• That leaves loaning Ukraine cash from the frozen Russian funds, which were originally held in financial instruments but have now largely turned into cash. That money is owned by Euroclear held in the European Central Bank.

Brussels' executive arm acknowledges Belgium has legitimate concerns and claims it is assured it has addressed them.

The proposal is for Belgium to be protected with a assurance applying to 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 took legal action against Belgium itself, any judgment by a Russian court would not be recognized in the EU.

In a key development, EU ambassadors are expected to agree on Friday to freeze indefinitely Russia's central bank assets held in Europe permanently.

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

The EU ambassadors are planning to use an extraordinary measure under Article 122 of the EU Treaties so the assets stay blocked as long as an "immediate threat to the economic security of the union" continues.

Why Belgium is Still Not Convinced

The Belgian government is adamant it remains a strong supporter of Ukraine, but perceives regulatory pitfalls in the plan and is concerned about being left to handle the repercussions if things go wrong.

A typically fractured political scene in this case has united behind Prime Minister Bart de Wever, who is facing pressure from fellow EU leaders.

"The Belgian economy is not large. Belgian GDP is around €565bn – think about if it would need to shoulder a €185bn bill," says Veerle Colaert, expert in financial law at KU Leuven University.

While the EU might be able to secure sufficient protections for the loan itself, Belgium worries about an added risk of being vulnerable to extra legal costs.

Prof Colaert also contends the requirement for Euroclear to issue credit to the EU would contravene EU banking regulations.

"Banks need to comply with capital and liquidity requirements and shouldn't make one enormous loan. Now the EU is instructing Euroclear to do precisely that.

"Why do we have these financial regulations? It's because we want banks to be secure. And if things go wrong it would fall to Belgium to save Euroclear. That's a further cause why it's so important for Belgium to obtain absolute protections for Euroclear."

The European Union In a Difficult Position from Every Direction

There is no time to lose, warn a group of EU member states including those closest to Russia such as the Baltics, Finland and Poland. They believe the proposal to use Russian funds is "the most financially feasible and politically realistic solution".

"It is a decisive moment for us," states 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 reach an agreement in a week's time".

While Russia is adamant its money should not be accessed, there are additional apprehensions among EU officials that the US may want to deploy Russia's blocked funds differently, as part of its own peace initiative.

Zelensky has stated Ukraine is working with Europe and the US on a rebuilding fund, but he is also mindful the US has been talking to Russia about potential collaboration.

An early draft 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