Moscow Hits Back at Europe's Scheme to Lend Frozen Russian Cash to Kyiv

Kyiv remains facing a severe shortage of cash to maintain its military and economy afloat, after close to 48 months of Russia's full-scale war.

From the EU's perspective, the solution to addressing Ukraine's funding gap of €135.7bn for the coming 24 months is found in assets belonging to Russia that are frozen sitting in Belgian bank Euroclear, and Brussels aim to give it the green light at their meeting in Brussels next week.

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

'Only Fair' to Use Russia's Funds, Argue Ukraine and the EU

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

Brussels and Kyiv argue that money should be used to rebuild what Russia has laid waste to: The European Commission refers to it as a "reconstruction loan" and has come up with a plan to bolster Ukraine's economy amounting to €90bn.

"It is only just that the assets frozen from Russia should be used to reconstruct what Russia has destroyed – and that money then becomes Ukraine's," states Ukraine's Volodymyr Zelensky.

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

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

Authorities in Brussels is anxious it will be burdened by an enormous bill if it all backfires, and Euroclear head Valérie Urbain says using the assets could "undermine the global financial architecture".

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

The leader of Belgium Bart de Wever has presented the EU with a series of "logical, sensible, and warranted conditions" before he will agree to the reparations plan, and he has not excluded legal action if it "poses significant risks" for his country.

Explaining the EU's Strategy?

Brussels is racing against time before next Thursday's summit to agree on a arrangement that Belgium can accept.

So far the EU has avoided accessing the frozen capital directly but for the past year has transferred the "windfall profits" from them to Ukraine. In 2024 that amounted to €3.7bn. Juridically, using the interest is seen as less risky as Russia is sanctioned and the proceeds are not property of the Russian state.

But global military support for Ukraine has fallen significantly in 2025, and Europe has found it difficult to make up the deficit resulting from the US decision to virtually halt funding Ukraine under President Donald Trump.

There are presently two EU proposals designed to furnishing Ukraine with €90bn, to pay for a large portion of its budgetary necessities.

• Option one is to raise the money on the markets, backed by the EU budget as a guarantee. This is Belgium's favored solution but it requires a consensus by EU leaders and that would be challenging when two member states are against funding Ukraine's military.
• That leaves loaning Ukraine cash from the frozen Russian funds, which were initially held in financial instruments but have now mostly been converted into cash. That money is owned by Euroclear located within the European Central Bank.

Brussels' executive arm recognizes Belgium has legitimate concerns and states it is confident it has addressed them.

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

Should Euroclear suffer a loss 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.

If Russia took legal action against Belgium itself, any judgment by a Russian court would not be accepted in the EU.

In a key development, 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 by consensus every six months to continue the freeze, which could have meant a ongoing risk to Belgium.

The EU ambassadors are expected to use an emergency clause under Article 122 of the EU Treaties so the assets stay blocked as long as an "immediate threat to the economic interests of the union" continues.

The Reasons Belgium is Remains On Board

Belgium is insistent it remains a staunch ally of Ukraine, but sees regulatory pitfalls in the plan and is concerned 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 facing pressure from fellow EU leaders.

"Belgium is a small economy. Belgian GDP is approximately €565bn – consider if it would need to bear a €185bn bill," comments Veerle Colaert, professor of financial law at KU Leuven University.

While the EU might be able to secure enough protections for the loan itself, Belgium fears an additional danger of being exposed to extra legal costs.

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

"Banks need to follow prudential rules and shouldn't make one enormous loan. Now the EU is telling Euroclear to do exactly that.

"Why do we have these banking laws? It's because we want banks to be stable. And if things fail it would become the responsibility of Belgium to save Euroclear. That's an additional reason why it's so vital for Belgium to secure absolute protections for Euroclear."

EU Leaders In a Difficult Position from Multiple Fronts

The situation is urgent, caution seven EU member states including those closest to Russia such as the Baltics, Finland and Poland. They argue the frozen assets plan is "the most financially feasible and politically realistic solution".

"It's a matter of destiny for us," states 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 succeed 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 peace initiative.

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

An initial document 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