Russia Retaliates at Europe's Scheme to Loan Frozen Russian Cash to Kyiv

Ukraine is facing a severe shortage of cash to keep going its military and economy, after almost four years of full-scale conflict with Russia.

From the EU's perspective, the solution to addressing Ukraine's funding gap of €135.7bn for the next two years rests with assets belonging to Russia that are frozen located within Belgian bank Euroclear, and Brussels hope to sign that off at their EU leaders' conference next week.

Moscow's representatives caution the EU plan would be an confiscation, and the Central Bank of Russia stated on Friday it was taking to court Euroclear in a Moscow court prior to a conclusive plan is made.

'Just' to Employ Russia's Assets, Say European and Ukrainian Officials

Overall, Russia has approximately €210bn of its assets frozen in the EU, and €185bn of that is in the custody of Euroclear.

Brussels and Kyiv contend that that capital should be used to rebuild what Russia has devastated: EU officials terms it a "reparations loan" and has proposed a plan to support Ukraine's economy to the tune of €90bn.

"It's only fair that Moscow's blocked funds should be used to reconstruct what Russia has destroyed – and that those funds then becomes Ukraine's," states Ukrainian President Volodymyr Zelensky.

German Chancellor Friedrich Merz states the assets will "allow Ukraine to defend itself successfully against future Russian attacks".

The legal move by Moscow was foreseen in Brussels. But it is not only Moscow that is dissatisfied.

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

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

Belgian Prime Minister Bart de Wever has presented the EU with a series of "pragmatic, fair, and legitimate conditions" before he will agree to the reconstruction loan scheme, and he has not excluded legal action if it "carries significant risks" for his country.

The Details of the EU's Proposal?

European Union officials is working to the wire ahead of next Thursday's summit to come up with a arrangement that Belgium can support.

Previously the EU has held off using the frozen capital directly but starting in 2024 has paid the "windfall profits" from them to Ukraine. In 2024 that was €3.7bn. Juridically, using the interest is seen as permissible as Russia is subject to sanctions and the earnings are not Russian sovereign property.

But foreign defense assistance 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 proposals aimed at furnishing Ukraine with €90bn, to pay for a large portion of its budgetary necessities.

• The first is to borrow the funds on financial markets, guaranteed by the EU budget as a surety. This is Belgium's first choice but it requires a agreement by all by EU leaders and that would be problematic when Budapest and Bratislava are against funding Ukraine's military.
• The alternative is lending Ukraine cash from the Moscow's immobilized capital, which were initially held in bonds but have now largely been converted into cash. That funding is Euroclear property held in the European Central Bank.

Brussels' executive arm recognizes Belgium has valid worries and says it is assured it has resolved them.

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

Should Euroclear suffer a loss of its own assets in Russia, the shortfall would be covered from assets belonging to Russia's own settlement agency which are in the EU.

If Russia went after Belgium itself, any decision by a Russian court would not be recognized in the EU.

As an important step, EU ambassadors are poised to endorse on Friday to immobilise Russia's central bank assets held in Europe for the foreseeable future.

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.

The Reasons Belgium is Not Yet On Board

Belgium is insistent it remains a committed partner of Ukraine, but identifies legal risks in the plan and is concerned about being shouldering the repercussions if things go wrong.

A normally partisan political environment in this case has rallied behind Prime Minister Bart de Wever, who is facing pressure from European colleagues.

"Belgium has a modest-sized economy. Belgian GDP is about €565bn – imagine if it would need to carry a €185bn bill," comments Veerle Colaert, expert in financial law at KU Leuven University.

While the EU might be able to arrange enough assurances for the loan itself, Belgium is concerned about an added risk of being vulnerable to extra fines or liabilities.

Prof Colaert also believes the stipulation for Euroclear to provide a loan to the EU would violate EU banking regulations.

"Financial institutions need to follow stability regulations and shouldn't make one enormous loan. Now the EU is instructing Euroclear to do precisely that.

"What is the purpose of these bank rules? It's because we want banks to be solvent. And if things turn sour it would become the responsibility of Belgium to save Euroclear. That's an additional reason why it's so crucial for Belgium to secure absolute assurances for Euroclear."

Europe Under Pressure from All Sides

There is no time to lose, state several EU member states including those bordering Russia such as the Baltics, Finland and Poland. They maintain the frozen assets plan is "the fiscally viable and politically achievable 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 afterwards. That's why we have to reach an agreement in a week's time".

While Russia is insistent its money should not be touched, there are additional apprehensions among leaders in Europe that the US may want to employ Russia's frozen billions differently, as part of its own peace initiative.

Zelensky has said Ukraine is working with Europe and the US on a reconstruction fund, but he is also aware the US has been holding discussions with Russia about potential collaboration.

An early draft of the US peace plan referred to $100bn of Russia's immobilized capital being used by the US for reconstruction, with the US {taking|receiving