Moscow Retaliates at the EU's Proposal to Lend Immobilized Russian Cash to Ukraine

Kyiv remains facing a severe shortage of cash to maintain its armed forces and economy, after close to 48 months of the ongoing invasion by Moscow.

For Europe, the remedy to filling Ukraine's financial shortfall of €135.7bn for the next two years lies in assets belonging to Russia that are frozen sitting in Belgian bank Euroclear, and EU leaders seek to give it the green light at their Brussels summit next week.

Moscow's representatives warn the EU plan would be an confiscation, and Russia's central bank declared on Friday it was taking to court Euroclear in a Moscow court even before a definitive agreement is made.

'Only Fair' to Use Russia's Assets, Argue European and Ukrainian Officials

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

Brussels and Kyiv maintain that money should be used to restore what Russia has laid waste to: The European Commission terms it a "reparations loan" and has proposed a plan to prop up Ukraine's economy amounting to €90bn.

"It is appropriate that the assets frozen from Russia should be used to rebuild what Russia has devastated – and that that capital then becomes ours," remarks Ukraine's Volodymyr Zelensky.

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

Moscow's lawsuit was anticipated in Brussels. But it is not just Moscow that is unhappy.

Authorities in Brussels is anxious it will be left with an huge bill if it all backfires, and Euroclear CEO Valérie Urbain warns using the assets could "undermine the international financial system".

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

Belgium's PM Bart de Wever has set the EU a series of "rational, reasonable, and justified conditions" before he will accept the reconstruction loan scheme, and he has refused to rule out legal action if it "presents significant risks" for his country.

What is the EU's Strategy?

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

So far the EU has refrained from using the frozen capital directly but for the past year has directed the "excess income" from them to Ukraine. In 2024 that totaled €3.7bn. From a legal standpoint, using the profits is deemed less risky as Russia is sanctioned and the returns are not property of the Russian state.

But foreign defense assistance for Ukraine has slipped dramatically in 2025, and Europe has struggled 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 seeking to furnishing Ukraine with €90bn, to cover two-thirds of its funding needs.

• The first is to raise the money on financial markets, secured against the EU budget as a guarantee. This is Belgium's first choice but it requires a consensus by EU leaders and that would be challenging when Budapest and Bratislava object to funding Ukraine's military.
• This makes the other option lending Ukraine cash from the Moscow's immobilized capital, which were initially held in bonds but have now mostly been converted into cash. That funding is owned by Euroclear located within the European Central Bank.

The EU's executive recognizes Belgium has legitimate concerns and states it is assured it has resolved them.

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

If Euroclear suffer a loss 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 enforced in the EU.

In a key development, EU ambassadors are expected to agree on Friday to freeze indefinitely Russia's central bank assets held in Europe indefinitely.

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 remain frozen as long as an "clear risk to the financial well-being of the union" continues.

Why Belgium is Still Not On Board

The Belgian government is firm it remains a committed partner of Ukraine, but sees regulatory pitfalls in the plan and is concerned about being forced to deal with the fallout if things do not work out.

A typically divided political landscape in this case has united behind 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 bear a €185bn bill," says Veerle Colaert, expert in financial law at KU Leuven University.

While the EU might be able to obtain sufficient guarantees for the loan itself, Belgium fears an added risk of being exposed to extra legal costs.

Prof Colaert also believes the requirement for Euroclear to issue credit to the EU would violate EU banking regulations.

"Lenders need to adhere to capital and liquidity requirements and shouldn't concentrate risk. Now the EU is asking Euroclear to do just 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 bail out Euroclear. That's an additional reason why it's so important for Belgium to get ironclad assurances for Euroclear."

Europe Under Pressure from Multiple Fronts

There is no time to lose, state seven EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They argue the scheme involving immobilized capital is "the most economically realistic and politically achievable solution".

"It's a matter of destiny for us," states 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 unyielding its money should not be touched, there are additional apprehensions among EU officials that the US may want to use Russia's blocked funds for another purpose, as part of its own peace plan.

Zelensky has stated Ukraine is working with Europe and the US on a recovery fund, but he is also cognizant the US has been engaging with Russia about future co-operation.

An initial document of the US peace plan suggested $100bn of Russia's immobilized capital being used by the US for reconstruction, with the US {taking|receiving