Russia Responds at Europe's Proposal to Lend Frozen Moscow's Funds to Kyiv

Ukraine is running out of financial resources to maintain its armed forces and economy, after nearly four years of full-scale conflict with Russia.

In the view of European leaders, the remedy to addressing Ukraine's funding gap of €135.7bn for the next two years is found in frozen Russian assets located within Belgian bank Euroclear, and Brussels seek to finalize the plan at their Brussels summit next week.

Russian officials warn the EU plan would be an illegal seizure, and Moscow's monetary authority declared on Friday it was taking to court Euroclear in a Moscow court ahead of a conclusive plan is made.

'Just' to Use Russia's Funds, Argue Kyiv and Brussels

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

The EU and Ukraine argue that that capital should be used to rebuild what Russia has destroyed: EU officials refers to it as a "loan for reparations" and has proposed a plan to support Ukraine's economy to the tune of €90bn.

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

Germany's leader Friedrich Merz says the assets will "enable Ukraine to shield itself successfully against future Russian attacks".

Russia's court action was foreseen in Brussels. But it is not only Moscow that is concerned.

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

Euroclear also has an estimated €16-17bn frozen 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 reparations plan, and he has not excluded legal action if it "poses significant risks" for his country.

The Details of the EU's Proposal?

European Union officials is under pressure before next Thursday's summit to finalize a compromise that Belgium can accept.

Until now the EU has refrained from accessing the assets themselves directly but for the past year has paid the "extraordinary revenues" from them to Ukraine. In 2024 that was €3.7bn. Juridically, using the profits is seen as less risky as Russia is under sanction and the proceeds are not Russian sovereign property.

But international military aid for Ukraine has declined sharply in 2025, and Europe has found it difficult to compensate for the shortfall resulting from the US decision to largely cease funding Ukraine under President Donald Trump.

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

• The first is to secure the capital on capital markets, guaranteed by the EU budget as a guarantee. This is Belgium's first choice but it demands a consensus by EU leaders and that would be challenging when Budapest and Bratislava are against funding Ukraine's military.
• The alternative is lending Ukraine cash from the frozen Russian funds, which were initially held in securities but have now largely turned into cash. That funding is owned by Euroclear located within the European Central Bank.

The EU's executive recognizes Belgium has legitimate concerns and claims it is confident it has addressed them.

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

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

In the event that Russia targeted Belgium itself, any ruling by a Russian court would not be accepted in the EU.

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

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

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

Why Belgium is Not Yet Convinced

Brussels is firm it remains a staunch ally of Ukraine, but identifies regulatory pitfalls in the plan and worries about being left to handle the repercussions if things go wrong.

A usually fractured political scene in this case has come together in support of Prime Minister Bart de Wever, who is being pressured from other European officials.

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

Although the EU might be able to obtain sufficient protections for the loan itself, Belgium is concerned about an added risk of being subject to extra legal costs.

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

"Financial institutions need to comply with stability regulations and shouldn't concentrate risk. Now the EU is instructing Euroclear to do exactly that.

"Why do we have these bank rules? It's because we want banks to be stable. And if things go wrong it would fall to Belgium to rescue Euroclear. That's another reason why it's so important for Belgium to secure absolute assurances for Euroclear."

Europe Under Pressure from Multiple Fronts

The situation is urgent, warn a group of EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They believe the proposal to use Russian funds is "a financially feasible and practically possible solution".

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

Although Russia is unyielding its money should not be used, there are added concerns among European figures that the US may want to employ Russia's frozen billions for another purpose, 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 cognizant the US has been engaging with 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