Russia Hits Back at the EU's Scheme to Lend Frozen Russian Assets to Kyiv

Ukraine is running out of funding to sustain its military and economy afloat, after almost four years of full-scale conflict with Russia.

From the EU's perspective, the remedy to filling Ukraine's funding gap of €135.7bn for the coming 24 months rests with Moscow's immobilized funds located within Belgian bank Euroclear, and European Union officials aim to give it the green light at their Brussels summit next week.

Russian officials 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 conclusive plan is made.

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

Overall, Russia has about €210bn of its funds frozen in the EU, and €185bn of that is in the custody of Euroclear.

Brussels and Kyiv contend that money should be used to reconstruct what Russia has laid waste to: EU officials terms it a "reparations loan" and has come up with a plan to support Ukraine's economy to the tune of €90bn.

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

Chancellor Friedrich Merz argues the assets will "enable Ukraine to defend itself effectively against any future Russian attacks".

Russia's court action was foreseen in Brussels. But it is not just Moscow that is dissatisfied.

The Belgian government is anxious it will be saddled with an enormous bill if it all goes wrong, and Euroclear chief executive Valérie Urbain warns using the assets could "destabilise the international financial system".

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

Belgium's PM Bart de Wever has set the EU a series of "pragmatic, fair, and legitimate conditions" before he will agree to the reconstruction loan scheme, and he has refused to rule out legal action if it "poses significant risks" for his country.

The Details of the EU's Strategy?

The EU is racing against time before next Thursday's summit to finalize a arrangement that Belgium can agree to.

Until now the EU has refrained from touching the assets themselves directly but for the past year has paid the "excess income" from them to Ukraine. In 2024 that totaled €3.7bn. From a legal standpoint, using the revenue is deemed safe as Russia is subject to sanctions and the returns are not Russian sovereign property.

But global military support for Ukraine has fallen significantly in 2025, and Europe has had trouble trying to make up the shortfall resulting from the US decision to virtually halt funding Ukraine under President Donald Trump.

There are at the moment two EU plans aimed at providing Ukraine with €90bn, to pay for two-thirds of its budgetary necessities.

• Option one is to secure the capital on the markets, backed by the EU budget as a guarantee. This is Belgium's first choice but it needs a agreement by all by EU leaders and that would be challenging when Budapest and Bratislava are against funding Ukraine's military.
• The alternative is loaning Ukraine cash from the frozen Russian funds, which were at first held in bonds but have now largely matured into cash. That funding is Euroclear property held in the European Central Bank.

The European Commission recognizes Belgium has legitimate concerns and states it is convinced it has dealt with them.

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

If Euroclear face a financial hit 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 went after Belgium itself, any decision by a Russian court would not be accepted in the EU.

In a significant move, EU ambassadors are expected to agree on Friday to immobilise Russia's central bank assets held in Europe indefinitely.

Previously they have had to vote all together every six months to continue the freeze, which could have meant a constant risk to Belgium.

The EU ambassadors are set to use an special provision under Article 122 of the EU Treaties so the assets continue to be immobilized as long as an "immediate threat to the economic security of the union" continues.

Why Belgium is Remains On Board

Brussels is insistent it remains a committed partner of Ukraine, but identifies regulatory pitfalls in the plan and fears being shouldering the repercussions if things do not work out.

A usually divided political landscape in this case has come together in support of Prime Minister Bart de Wever, who is facing pressure from fellow EU leaders.

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

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

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

"Financial institutions need to follow stability regulations and shouldn't put all their eggs in one basket. Now the EU is asking Euroclear to do just that.

"Why do we have these bank rules? It's because we want banks to be solvent. And if things fail it would fall to Belgium to rescue Euroclear. That's an additional reason why it's so crucial for Belgium to obtain absolute protections for Euroclear."

EU Leaders Under Pressure from Multiple Fronts

There is no time to lose, warn a group of EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They argue the proposal to use Russian funds is "the most economically realistic and practically possible solution".

"It's a matter of destiny for us," warns leading German conservative MP Norbert Röttgen. "If we fail, I don't know what we'll do subsequently. That's why we have to succeed in a week's time".

Although Russia is unyielding its money should not be used, there are added concerns among leaders in Europe that the US may want to use Russia's frozen billions differently, as part of its own peace plan.

Zelensky has indicated Ukraine is coordinating with Europe and the US on a recovery fund, but he is also mindful the US has been holding discussions with Russia about future co-operation.

A preliminary version of the US peace plan mentioned $100bn of Russia's frozen assets being used by the US for reconstruction, with the US {taking|receiving