Russia Retaliates at Europe's Plan to Lend Immobilized Russian Funds to Kyiv

Ukraine is facing a severe shortage of cash to maintain its armed forces and economy afloat, after almost four years of Russia's full-scale war.

For Europe, the answer to addressing Kyiv's funding gap of €135.7bn for the next two years is found in Moscow's immobilized funds held by Belgian bank Euroclear, and Brussels seek to sign that off at their EU leaders' conference next week.

Authorities in Russia warn the EU plan would be an illegal seizure, and the Central Bank of Russia announced on Friday it was initiating legal action against Euroclear in a Moscow court ahead of a definitive agreement is made.

'Appropriate' to Use Russia's Assets, Argue Ukraine and the EU

In total, Russia has about €210bn of its assets blocked in the EU, and €185bn of that is in the custody of Euroclear.

Brussels and Kyiv argue that those funds should be used to reconstruct what Russia has devastated: The European Commission refers to it as a "loan for reparations" and has proposed a plan to bolster Ukraine's economy amounting to €90bn.

"It is only just that Moscow's blocked funds should be used to reconstruct what Russia has destroyed – and that money then becomes Ukraine's," remarks Ukraine's Volodymyr Zelensky.

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

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

The Belgian government is anxious it will be burdened by an massive bill if it all goes wrong, and Euroclear chief executive Valérie Urbain argues using the assets could "undermine the international financial system".

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

The leader of Belgium Bart de Wever has presented the EU with a series of "rational, reasonable, and justified conditions" before he will agree to the reparations plan, and he has left open the possibility of legal action if it "poses significant risks" for his country.

What is the EU's Proposal?

The EU is racing against time ahead of next Thursday's summit to come up with a solution that Belgium can agree to.

Until now the EU has refrained from accessing the assets themselves directly but since last year has directed the "excess income" from them to Ukraine. In 2024 that was €3.7bn. From a legal standpoint, using the interest is considered less risky as Russia is under sanction and the returns are not property of the Russian state.

But international military aid for Ukraine has declined sharply in 2025, and Europe has found it difficult to make up the shortfall left by the US decision to all but stop funding Ukraine under President Donald Trump.

There are presently two EU options seeking to providing Ukraine with €90bn, to cover a majority of its financial requirements.

• The first is to secure the capital on capital markets, backed by the EU budget as a collateral. This is Belgium's first choice but it needs a unanimous vote by EU leaders and that would be problematic when two member states are against funding Ukraine's military.
• That leaves lending Ukraine cash from the frozen Russian funds, which were at first held in bonds but have now predominantly turned into cash. That capital is owned by Euroclear deposited at the European Central Bank.

The European Commission acknowledges Belgium has valid worries and states it is confident it has addressed them.

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

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

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

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

Until now they have had to vote by consensus every six months to continue the freeze, which could have meant a ongoing risk to Belgium.

The EU ambassadors are planning 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 interests of the union" continues.

Why Belgium is Still Not Satisfied

Brussels is firm it remains a committed partner of Ukraine, but identifies juridical dangers in the plan and worries about being left to handle the fallout if things go wrong.

A normally fractured political scene in this case has come together in support of Prime Minister Bart de Wever, who is under pressure from fellow EU leaders.

"The Belgian economy is not large. Belgian GDP is approximately €565bn – consider if it would need to shoulder a €185bn bill," says Veerle Colaert, professor of financial law at KU Leuven University.

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

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

"Banks need to comply with prudential rules and shouldn't concentrate risk. Now the EU is asking Euroclear to do just that.

"What is the purpose of these financial regulations? It's because we want banks to be secure. And if things turn sour it would fall to Belgium to bail out Euroclear. That's a further cause why it's so important for Belgium to obtain absolute assurances for Euroclear."

Europe Facing Strain from Multiple Fronts

Time is of the essence, caution seven EU member states including those closest to Russia such as the Baltics, Finland and Poland. They believe the frozen assets plan is "the economically realistic and politically achievable solution".

"This is a crucial test for us," states leading German conservative MP Norbert Röttgen. "Should we not succeed, I don't know what we'll do afterwards. That's why we have to succeed in a week's time".

While Russia is unyielding its money should not be used, there are additional apprehensions among European figures that the US may want to deploy Russia's blocked funds for another purpose, as part of its own peace initiative.

Zelensky has stated Ukraine is in discussions with Europe and the US on a reconstruction fund, but he is also mindful the US has been holding discussions with Russia about possible partnership.

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