Moscow Responds at Europe's Scheme to Loan Frozen Russian Funds to Ukraine

Kyiv remains depleting its cash to sustain its military and economy afloat, after close to 48 months of the ongoing invasion by Moscow.

In the view of European leaders, the solution to addressing Kyiv's financial shortfall of €135.7bn for the coming 24 months lies in frozen Russian assets held by Belgian bank Euroclear, and European Union officials hope to sign that off at their Brussels summit next week.

Moscow's representatives state the EU plan would be an confiscation, and the Central Bank of Russia announced on Friday it was suing Euroclear in a Moscow court even before a final decision is made.

'Appropriate' to Use Russia's Assets, Argue Ukraine and the EU

All told, Russia has about €210bn of its funds immobilized in the EU, and €185bn of that is managed by Euroclear.

The EU and Ukraine maintain that money should be used to reconstruct what Russia has laid waste to: EU officials terms it a "reconstruction loan" and has devised a plan to support Ukraine's economy to the tune of €90bn.

"It is only just that Moscow's blocked funds should be used to rebuild what Russia has destroyed – and that money then becomes ours," states Ukraine's Volodymyr Zelensky.

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

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

The Belgian government is worried it will be left with an huge bill if it all backfires, and Euroclear chief executive Valérie Urbain says using the assets could "undermine the global financial architecture".

Euroclear also has an approximate €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 endorse 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?

European Union officials is under pressure before next Thursday's summit to finalize a arrangement that Belgium can accept.

Previously the EU has held off using the assets themselves directly but starting in 2024 has directed the "extraordinary revenues" from them to Ukraine. In 2024 that amounted to €3.7bn. Legally, using the profits is seen as less risky as Russia is subject to sanctions and the returns are not Moscow's sovereign assets.

But international military aid for Ukraine has slipped dramatically in 2025, and Europe has had trouble trying to make up the deficit resulting from the US decision to all but stop funding Ukraine under President Donald Trump.

There are currently two EU plans designed to furnishing Ukraine with €90bn, to cover a large portion of its funding needs.

• Option one is to secure the capital on capital markets, secured against the EU budget as a surety. This is Belgium's preferred option but it needs a agreement by all by EU leaders and that would be problematic when Hungary and Slovakia are against funding Ukraine's military.
• The alternative is providing a loan of Ukraine cash from the Moscow's immobilized capital, which were originally held in financial instruments but have now largely matured into cash. That funding is Euroclear property deposited at the European Central Bank.

Brussels' executive arm acknowledges Belgium has legitimate concerns and claims it is assured it has addressed them.

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

If Euroclear face a financial hit of its own assets in Russia, that would be offset from assets belonging to Russia's own clearing house which are in the EU.

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

In a key development, EU ambassadors are expected to agree on Friday to immobilise Russia's central bank assets held in Europe for the foreseeable future.

Heretofore they have had to vote by consensus every six months to renew the freeze, which could have meant a repeated 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 "clear risk to the economic interests of the union" continues.

Why Belgium is Still Not Convinced

Belgium is insistent it remains a strong supporter of Ukraine, but perceives legal risks in the plan and is concerned about being left to handle the repercussions if things fail.

A normally partisan political environment in this case has rallied behind Prime Minister Bart de Wever, who is being pressured from other European officials.

"Belgium has a modest-sized economy. Belgian GDP is about €565bn – imagine if it would need to bear a €185bn bill," comments Veerle Colaert, expert in financial law at KU Leuven University.

Although the EU might be able to secure adequate guarantees for the loan itself, Belgium fears an additional danger of being vulnerable to extra damages or penalties.

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

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

"Why do we have these bank rules? It's because we want banks to be secure. And if things fail it would become the responsibility of Belgium to rescue Euroclear. That's another reason why it's so important for Belgium to secure absolute assurances for Euroclear."

Europe Under Pressure from Every Direction

The situation is urgent, state a group of EU member states including those closest to Russia such as the Baltics, Finland and Poland. They maintain the scheme involving immobilized capital is "a economically realistic and politically achievable solution".

"It's a matter of destiny for us," warns leading German conservative MP Norbert Röttgen. "Should we not succeed, 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 adamant its money should not be touched, there are further worries among European figures that the US may want to deploy Russia's blocked funds for another purpose, as part of its own peace initiative.

Zelensky has said Ukraine is in discussions 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 referred to $100bn of Russia's immobilized capital being used by the US for reconstruction, with the US {taking|receiving