Russia Retaliates at the EU's Proposal to Loan Frozen Russian Assets to Kyiv

Ukraine is running out of funding to keep going its military and economy, after nearly four years of Russia's full-scale war.

From the EU's perspective, the answer to plugging Ukraine's financial shortfall of €135.7bn for the coming 24 months lies in frozen Russian assets held by Belgian bank Euroclear, and EU leaders aim to finalize the plan at their meeting in Brussels next week.

Russian officials state the EU plan would be an act of theft, and Russia's central bank declared on Friday it was taking to court Euroclear in a Moscow court even before a final decision is made.

'Just' to Employ Moscow's Assets, Say Ukraine and the EU

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

The EU and Ukraine maintain that that capital should be used to restore what Russia has destroyed: Brussels calls it a "loan for reparations" and has devised a plan to prop up Ukraine's economy to the tune of €90bn.

"It is appropriate that Russia's frozen assets should be used to reconstruct what Russia has destroyed – and that those funds then becomes ours," states Ukraine's Volodymyr Zelensky.

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

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

The Belgian government is anxious it will be saddled with an enormous bill if it all fails, and Euroclear head Valérie Urbain says using the assets could "destabilise the world's financial order".

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

Belgian Prime Minister Bart de Wever has presented the EU with a series of "rational, reasonable, and justified conditions" before he will agree to the reconstruction loan scheme, 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 prior to next Thursday's summit to finalize a solution that Belgium can agree to.

Until now the EU has avoided accessing the principal funds directly but since last year has transferred the "excess income" from them to Ukraine. In 2024 that totaled €3.7bn. Legally, using the profits is deemed less risky as Russia is sanctioned and the returns are not Russian sovereign property.

But international military aid for Ukraine has slipped dramatically in 2025, and Europe has had trouble trying to compensate for the gap left by the US decision to virtually halt funding Ukraine under President Donald Trump.

There are presently two EU plans aimed at providing Ukraine with €90bn, to finance a large portion of its funding needs.

• One is to secure the capital on financial markets, guaranteed by the EU budget as a surety. This is Belgium's preferred option but it demands a unanimous vote by EU leaders and that would be challenging when Budapest and Bratislava oppose funding Ukraine's military.
• The alternative is loaning Ukraine cash from the frozen Russian funds, which were initially held in securities but have now mostly turned into cash. That capital is Euroclear property located within the European Central Bank.

The European Commission acknowledges Belgium has justified fears and states it is assured it has dealt with them.

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

If Euroclear suffer a loss 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.

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

In a significant move, EU ambassadors are set to approve on Friday to immobilise Russia's central bank assets held in Europe permanently.

Until now they have had to vote all together every six months to extend the freeze, which could have meant a repeated risk to Belgium.

The EU ambassadors are expected to use an extraordinary measure under Article 122 of the EU Treaties so the assets stay blocked as long as an "direct danger to the financial well-being of the union" continues.

The Reasons Belgium is Still Not Satisfied

Belgium is adamant it remains a strong supporter of Ukraine, but perceives juridical dangers in the plan and fears being left to handle the fallout if things do not work out.

A typically fractured political scene in this case has united behind Prime Minister Bart de Wever, who is facing pressure from fellow EU leaders.

"The Belgian economy is not large. Belgian GDP is about €565bn – consider if it would need to bear a €185bn bill," notes Veerle Colaert, academic specializing in financial regulation at KU Leuven University.

Although the EU might be able to arrange sufficient protections for the loan itself, Belgium fears an added risk of being subject to extra legal costs.

Prof Colaert also argues the demand for Euroclear to issue credit to the EU would violate EU banking regulations.

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

"Why do we have these banking laws? It's because we want banks to be secure. And if things fail it would be up to Belgium to bail out Euroclear. That's a further cause why it's so crucial for Belgium to obtain ironclad guarantees for Euroclear."

EU Leaders Facing Strain from Every Direction

There is no time to lose, caution several EU member states including those closest to Russia such as the Baltics, Finland and Poland. They maintain the proposal to use Russian funds is "a fiscally viable and practically possible 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 next. That's why we have to reach an agreement in a week's time".

While Russia is insistent its money should not be accessed, there are added concerns among EU officials that the US may want to employ Russia's immobilized billions differently, as part of its own diplomatic proposal.

Zelensky has indicated Ukraine is working with Europe and the US on a reconstruction fund, but he is also cognizant the US has been holding discussions 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