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

Kyiv remains facing a severe shortage of funding to maintain its armed forces and economy, after almost four years of the ongoing invasion by Moscow.

In the view of European leaders, the answer to plugging Ukraine's funding gap of €135.7bn for the next two years rests with Moscow's immobilized funds located within Belgian bank Euroclear, and EU leaders hope to give it the green light at their meeting in Brussels next week.

Russian officials caution the EU plan would be an act of theft, and Moscow's monetary authority stated on Friday it was suing Euroclear in a Moscow court even before a final decision is made.

'Just' to Utilize Russia's Assets, Assert Ukraine and the EU

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

The EU and Ukraine argue that those funds should be used to reconstruct what Russia has destroyed: EU officials refers to it as a "loan for reparations" and has devised a plan to bolster Ukraine's economy to the tune of €90bn.

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

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

Russia's court action was anticipated in Brussels. But it is not just Moscow that is unhappy.

Belgium is concerned it will be burdened by an enormous bill if it all fails, and Euroclear head Valérie Urbain warns using the assets could "disrupt the world's financial order".

Euroclear also has an approximate €16-17bn immobilised in Russia.

Belgium's PM Bart de Wever has given Brussels a series of "rational, reasonable, and justified conditions" before he will agree to the reconstruction loan scheme, and he has not excluded legal action if it "poses significant risks" for his country.

The Details of the EU's Strategy?

European Union officials is under pressure ahead of next Thursday's summit to agree on a arrangement that Belgium can agree to.

So far the EU has avoided 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. From a legal standpoint, using the revenue is seen as less risky as Russia is sanctioned and the earnings are not Moscow's sovereign assets.

But foreign defense assistance for Ukraine has slipped dramatically in 2025, and Europe has found it difficult to cover the shortfall left by the US decision to all but stop funding Ukraine under President Donald Trump.

There are at the moment two EU plans designed to furnishing Ukraine with €90bn, to pay for two-thirds of its financial requirements.

• The first is to raise the money on financial markets, secured against the EU budget as a surety. This is Belgium's preferred option but it requires a unanimous vote by EU leaders and that would be problematic when Budapest and Bratislava are against funding Ukraine's military.
• This makes the other option loaning Ukraine cash from the Moscow's immobilized capital, which were initially held in securities but have now predominantly turned into cash. That capital is Euroclear property held in the European Central Bank.

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

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

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

In a significant move, EU ambassadors are poised to endorse on Friday to permanently block Russia's central bank assets held in Europe indefinitely.

Heretofore they have had to vote all together 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 continue to be immobilized as long as an "immediate threat to the economic security of the union" continues.

The Reasons Belgium is Remains Satisfied

Belgium is firm it remains a strong supporter of Ukraine, but identifies regulatory pitfalls in the plan and fears being shouldering the fallout if things do not work out.

A usually fractured political scene in this case has united behind Prime Minister Bart de Wever, who is being pressured from European colleagues.

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

Although the EU might be able to secure adequate assurances for the loan itself, Belgium fears an additional danger of being exposed to extra legal costs.

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

"Financial institutions need to adhere to 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 stable. And if things go wrong it would be up to Belgium to bail out Euroclear. That's a further cause why it's so vital for Belgium to secure absolute assurances for Euroclear."

The European Union Under Pressure from Multiple Fronts

Time is of the essence, warn a group of EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They maintain the frozen assets plan is "the most economically realistic and practically possible solution".

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

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

Zelensky has stated Ukraine is coordinating with Europe and the US on a reconstruction fund, but he is also mindful the US has been engaging with Russia about potential collaboration.

An initial document of the US peace plan suggested $100bn of Russia's blocked funds being used by the US for reconstruction, with the US {taking|receiving