Russia Responds at the EU's Scheme to Loan Immobilized Moscow's Cash to Kyiv

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

In the view of European leaders, the remedy to plugging Kyiv's funding gap of €135.7bn for the next two years rests with assets belonging to Russia that are frozen sitting in Belgian bank Euroclear, and Brussels seek to sign that off at their meeting in Brussels next week.

Russian officials caution the EU plan would be an illegal seizure, and the Central Bank of Russia announced on Friday it was taking to court Euroclear in a Moscow court even before a definitive agreement is made.

'Appropriate' to Use Russia's Funds, Say Kyiv and Brussels

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

European and Ukrainian authorities maintain that those funds should be used to reconstruct what Russia has destroyed: Brussels refers to it as a "reconstruction loan" and has devised a plan to bolster Ukraine's economy valued at €90bn.

"It is appropriate that Moscow's blocked funds should be used to rebuild what Russia has devastated – and that money then becomes Ukraine's," says Ukraine's Volodymyr Zelensky.

German Chancellor Friedrich Merz states the assets will "help Ukraine to defend itself effectively against subsequent Russian attacks".

Moscow's lawsuit was foreseen in Brussels. But it is not only Moscow that is unhappy.

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

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

The leader of Belgium Bart de Wever has presented the EU with a series of "rational, reasonable, and justified conditions" before he will endorse the reconstruction loan scheme, and he has refused to rule out legal action if it "carries significant risks" for his country.

Explaining the EU's Strategy?

The EU is under pressure before next Thursday's summit to come up with a compromise that Belgium can support.

Previously the EU has refrained from touching the principal funds directly but for the past year has directed the "extraordinary revenues" from them to Ukraine. In 2024 that totaled €3.7bn. From a legal standpoint, using the profits is considered less risky as Russia is sanctioned and the earnings are not Russian sovereign property.

But international military aid for Ukraine has declined sharply in 2025, and Europe has struggled to cover the deficit left by the US decision to virtually halt funding Ukraine under President Donald Trump.

There are currently two EU plans aimed at furnishing Ukraine with €90bn, to cover two-thirds of its financial requirements.

• Option one is to borrow the funds on capital markets, backed by the EU budget as a collateral. This is Belgium's preferred option but it demands a consensus by EU leaders and that would be difficult when Budapest and Bratislava object to funding Ukraine's military.
• That leaves loaning Ukraine cash from the Moscow's immobilized capital, which were originally held in securities but have now mostly turned into cash. That funding is Euroclear property located within the European Central Bank.

Brussels' executive arm accepts Belgium has valid worries and states it is confident it has resolved them.

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

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

If Russia targeted Belgium itself, any decision by a Russian court would not be recognized in the EU.

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

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

The EU ambassadors are expected 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 interests 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 juridical dangers in the plan and is concerned about being left to handle the fallout if things fail.

A usually partisan political environment in this case has united behind Prime Minister Bart de Wever, who is being pressured from European colleagues.

"Belgium has a modest-sized economy. Belgian GDP is around €565bn – imagine if it would need to shoulder a €185bn bill," notes Veerle Colaert, academic specializing in financial regulation at KU Leuven University.

Although the EU might be able to arrange enough assurances for the loan itself, Belgium is concerned about an additional danger of being subject to extra fines or liabilities.

Prof Colaert also argues the requirement for Euroclear to issue credit to the EU would contravene EU banking regulations.

"Financial institutions need to follow prudential rules and shouldn't put all their eggs in one basket. Now the EU is telling Euroclear to do exactly that.

"Why do we have these bank rules? It's because we want banks to be stable. And if things turn sour it would be up to Belgium to save Euroclear. That's another reason why it's so crucial for Belgium to secure absolute assurances for Euroclear."

Europe Under Pressure from Every Direction

Time is of the essence, warn seven EU member states including those closest to Russia such as the Baltics, Finland and Poland. They believe the scheme involving immobilized capital is "a economically realistic and politically achievable solution".

"It's a matter of destiny 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 finalize the deal in a week's time".

Although Russia is unyielding its money should not be accessed, there are added concerns among EU officials that the US may want to use Russia's frozen billions in another way, as part of its own peace plan.

Zelensky has indicated Ukraine is coordinating with Europe and the US on a reconstruction fund, but he is also cognizant the US has been holding discussions with Russia about possible partnership.

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