Moscow Retaliates at Europe's Scheme to Loan Frozen Russian Assets to Ukraine

Ukraine is depleting its funding to maintain its military and economy, after nearly four years of full-scale conflict with Russia.

From the EU's perspective, the remedy to plugging Ukraine's budget hole of €135.7bn for the following biennium is found in frozen Russian assets sitting in Belgian bank Euroclear, and EU leaders seek to sign that off at their EU leaders' conference next week.

Authorities in Russia state the EU plan would be an illegal seizure, and Moscow's monetary authority declared on Friday it was initiating legal action against Euroclear in a Moscow court even before a final decision is made.

'Just' to Utilize Russia's Assets, Argue Kyiv and Brussels

Overall, Russia has approximately €210bn of its state reserves frozen in the EU, and €185bn of that is managed by Euroclear.

European and Ukrainian authorities contend that that capital should be used to restore what Russia has devastated: EU officials refers to it as a "reconstruction loan" and has devised a plan to support Ukraine's economy valued at €90bn.

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

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

Moscow's lawsuit was expected in Brussels. But it is not just Moscow that is concerned.

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

Euroclear also has an roughly €16-17bn locked in Russia.

Belgian Prime Minister Bart de Wever has given Brussels a series of "rational, reasonable, and justified conditions" before he will endorse the reconstruction loan scheme, and he has left open the possibility of legal action if it "presents significant risks" for his country.

The Details of the EU's Proposal?

The EU is under pressure ahead of next Thursday's summit to agree on a compromise that Belgium can accept.

Until now the EU has held off touching the assets themselves directly but starting in 2024 has paid the "excess income" from them to Ukraine. In 2024 that totaled €3.7bn. Juridically, using the profits is considered safe as Russia is under sanction and the returns are not property of the Russian state.

But foreign defense assistance for Ukraine has declined sharply in 2025, and Europe has found it difficult to cover the gap caused by the US decision to virtually halt funding Ukraine under President Donald Trump.

There are currently two EU proposals seeking to supplying Ukraine with €90bn, to finance a large portion of its funding needs.

• Option one is to secure the capital on financial markets, guaranteed by 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 Hungary and Slovakia oppose funding Ukraine's military.
• The alternative is providing a loan of Ukraine cash from the Moscow's immobilized capital, which were initially held in financial instruments but have now mostly been converted into cash. That money is owned by Euroclear held in the European Central Bank.

The European Commission acknowledges Belgium has legitimate concerns and says it is convinced it has resolved them.

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

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

In the event that Russia went after 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 freeze indefinitely Russia's central bank assets held in Europe permanently.

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

The EU ambassadors are planning to use an special provision under Article 122 of the EU Treaties so the assets stay blocked as long as an "direct danger to the economic interests of the union" continues.

The Reasons Belgium is Remains Convinced

The Belgian government is adamant it remains a staunch ally of Ukraine, but identifies juridical dangers in the plan and is concerned about being shouldering the consequences if things go wrong.

A normally divided political landscape in this case has united behind Prime Minister Bart de Wever, who is under pressure from fellow EU leaders.

"Belgium has a modest-sized economy. Belgian GDP is about €565bn – think about if it would need to shoulder a €185bn bill," notes Veerle Colaert, professor of financial law at KU Leuven University.

While the EU might be able to obtain adequate protections for the loan itself, Belgium worries about an added risk of being subject to extra damages or penalties.

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

"Financial institutions need to follow prudential rules and shouldn't concentrate risk. 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 go wrong it would be up to Belgium to rescue Euroclear. That's an additional reason why it's so vital for Belgium to get ironclad guarantees for Euroclear."

The European Union Under Pressure from All Sides

The situation is urgent, caution several EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They argue the scheme involving immobilized capital is "the economically realistic and politically realistic solution".

"It is a decisive moment for us," states leading German conservative MP Norbert Röttgen. "If the plan collapses, I don't know what we'll do subsequently. That's why we have to reach an agreement in a week's time".

Although Russia is insistent its money should not be accessed, 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 diplomatic proposal.

Zelensky has said Ukraine is working with Europe and the US on a recovery fund, but he is also aware the US has been talking to Russia about possible partnership.

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