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

Kyiv remains depleting its financial resources to sustain its military and economy afloat, after close to 48 months of Russia's full-scale war.

For Europe, the remedy to addressing Ukraine's budget hole of €135.7bn for the following biennium lies in Moscow's immobilized funds held by Belgian bank Euroclear, and Brussels aim to give it the green light at their EU leaders' conference next week.

Russian officials caution the EU plan would be an confiscation, and Moscow's monetary authority declared on Friday it was initiating legal action against Euroclear in a Moscow court prior to a final decision is made.

'Just' to Employ Russia's Assets, Say Kyiv and Brussels

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

Brussels and Kyiv maintain that those funds should be used to restore what Russia has devastated: The European Commission calls it a "loan for reparations" and has proposed a plan to prop up Ukraine's economy to the tune of €90bn.

"It's only fair that the assets frozen from Russia should be used to reconstruct what Russia has destroyed – and that those funds then becomes ours," remarks Ukrainian President Volodymyr Zelensky.

Chancellor Friedrich Merz argues the assets will "allow Ukraine to protect itself successfully against future Russian attacks".

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

Authorities in Brussels is worried it will be burdened by an huge bill if it all goes wrong, and Euroclear chief executive Valérie Urbain says using the assets could "destabilise the international financial system".

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

Belgian Prime Minister Bart de Wever has set the EU a series of "logical, sensible, and warranted 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.

Explaining the EU's Proposal?

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

So far the EU has held off using the frozen capital directly but starting in 2024 has paid the "excess income" from them to Ukraine. In 2024 that amounted to €3.7bn. From a legal standpoint, using the profits is considered safe as Russia is subject to sanctions and the earnings are not property of the Russian state.

But international military aid for Ukraine has slipped dramatically in 2025, and Europe has had trouble trying to make up the gap resulting from the US decision to largely cease funding Ukraine under President Donald Trump.

There are presently two EU plans designed to providing Ukraine with €90bn, to pay for two-thirds of its financial requirements.

• One is to raise the money on capital markets, secured against the EU budget as a collateral. This is Belgium's preferred option but it requires a agreement by all by EU leaders and that would be challenging when Budapest and Bratislava object to funding Ukraine's military.
• This makes the other option loaning Ukraine cash from the Russian assets, which were initially held in financial instruments but have now mostly turned into cash. That capital is Euroclear property deposited at the European Central Bank.

The European Commission acknowledges Belgium has valid worries and states it is assured it has dealt with them.

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

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

In the event that Russia took legal action against Belgium itself, any decision by a Russian court would not be recognized in the EU.

In a significant move, EU ambassadors are expected to agree on Friday to immobilise Russia's central bank assets held in Europe indefinitely.

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

The EU ambassadors are set 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.

Why Belgium is Still Not Convinced

The Belgian government is insistent it remains a strong supporter of Ukraine, but perceives legal risks in the plan and worries about being shouldering the repercussions if things do not work out.

A normally divided political landscape in this case has united behind Prime Minister Bart de Wever, who is being pressured from European colleagues.

"The Belgian economy is not large. Belgian GDP is around €565bn – consider if it would need to shoulder a €185bn bill," comments Veerle Colaert, academic specializing in financial regulation at KU Leuven University.

Although the EU might be able to arrange adequate guarantees for the loan itself, Belgium is concerned about an added risk of being vulnerable to extra damages or penalties.

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

"Financial institutions need to follow capital and liquidity requirements and shouldn't put all their eggs in one basket. Now the EU is asking Euroclear to do exactly that.

"What is the purpose of these financial regulations? It's because we want banks to be stable. And if things turn sour it would fall to Belgium to rescue Euroclear. That's another reason why it's so vital for Belgium to obtain absolute assurances for Euroclear."

The European Union Facing Strain from Multiple Fronts

The situation is urgent, caution a group of EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They believe the frozen assets plan is "the most financially feasible and practically possible solution".

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

Although Russia is insistent its money should not be touched, there are further worries among European figures that the US may want to use Russia's frozen billions differently, as part of its own diplomatic proposal.

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

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