Russia Hits Back at the EU's Proposal to Lend Immobilized Russian Cash to Kyiv

Ukraine is facing a severe shortage of financial resources to maintain its military and economy afloat, after almost four years of the ongoing invasion by Moscow.

In the view of European leaders, the remedy to plugging Kyiv's funding gap of €135.7bn for the coming 24 months is found in Moscow's immobilized funds held by Belgian bank Euroclear, and European Union officials hope to finalize the plan at their EU leaders' conference next week.

Authorities in Russia state the EU plan would be an act of theft, and Russia's central bank declared on Friday it was suing Euroclear in a Moscow court even before a definitive agreement is made.

'Just' to Employ Moscow's Funds, Argue Ukraine and the EU

In total, Russia has about €210bn of its funds blocked in the EU, and €185bn of that is held by Euroclear.

The EU and Ukraine maintain that those funds should be used to rebuild what Russia has laid waste to: Brussels calls it a "reparations loan" and has proposed a plan to bolster Ukraine's economy to the tune of €90bn.

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

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

The legal move by Moscow was expected in Brussels. But it is not only Moscow that is unhappy.

Belgium is concerned it will be left with an huge bill if it all goes wrong, and Euroclear CEO Valérie Urbain says using the assets could "disrupt the international financial system".

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

The leader of Belgium Bart de Wever has set the EU a series of "pragmatic, fair, and legitimate conditions" before he will accept the reconstruction loan scheme, and he has not excluded legal action if it "carries significant risks" for his country.

What is the EU's Proposal?

The EU is racing against time prior to next Thursday's summit to agree on a arrangement that Belgium can accept.

Previously the EU has held off touching the assets themselves directly but starting in 2024 has directed the "windfall profits" from them to Ukraine. In 2024 that amounted to €3.7bn. Juridically, using the profits is deemed permissible as Russia is sanctioned and the returns are not Russian sovereign property.

But global military support for Ukraine has declined sharply in 2025, and Europe has found it difficult to make up the gap resulting from the US decision to largely cease funding Ukraine under President Donald Trump.

There are presently two EU options designed to furnishing Ukraine with €90bn, to cover two-thirds of its budgetary necessities.

• One is to secure the capital on capital markets, guaranteed by the EU budget as a collateral. This is Belgium's first choice but it requires a unanimous vote by EU leaders and that would be problematic when Hungary and Slovakia are against funding Ukraine's military.
• This makes the other option lending Ukraine cash from the Russian assets, which were initially held in bonds but have now predominantly been converted into cash. That funding is owned by Euroclear deposited at the European Central Bank.

The EU's executive accepts Belgium has valid worries and says it is convinced it has resolved them.

The plan is for Belgium to be safeguarded with a assurance 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.

In the event that Russia targeted Belgium itself, any ruling by a Russian court would not be recognized in the EU.

As an important step, EU ambassadors are poised to endorse on Friday to permanently block Russia's central bank assets held in Europe indefinitely.

Until now 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 planning to use an extraordinary measure under Article 122 of the EU Treaties so the assets remain frozen as long as an "immediate threat to the financial well-being of the union" continues.

Why Belgium is Not Yet Convinced

The Belgian government is firm it remains a strong supporter of Ukraine, but sees regulatory pitfalls in the plan and fears being forced to deal with the repercussions if things go wrong.

A typically fractured political scene in this case has come together in support of Prime Minister Bart de Wever, who is being pressured from European colleagues.

"The Belgian economy is not large. Belgian GDP is approximately €565bn – consider if it would need to carry a €185bn bill," comments Veerle Colaert, expert in financial law at KU Leuven University.

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

Prof Colaert also contends the demand for Euroclear to provide a loan to the EU would violate EU banking regulations.

"Lenders need to comply with capital and liquidity requirements and shouldn't put all their eggs in one basket. Now the EU is instructing Euroclear to do just that.

"What is the purpose of these financial regulations? It's because we want banks to be secure. And if things fail it would become the responsibility of Belgium to save Euroclear. That's a further cause why it's so important for Belgium to get ironclad protections for Euroclear."

The European Union Facing Strain from All Sides

There is no time to lose, warn a group of EU member states including those bordering Russia such as the Baltics, Finland and Poland. They believe the proposal to use Russian funds is "the most financially feasible and politically achievable solution".

"This is a crucial test for us," says leading German conservative MP Norbert Röttgen. "If the plan collapses, I don't know what we'll do next. That's why we have to finalize the deal in a week's time".

Although Russia is insistent its money should not be used, there are further worries among EU officials that the US may want to deploy Russia's blocked funds differently, as part of its own peace initiative.

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

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