Moscow Responds at Europe's Plan to Loan Immobilized Russian Cash to Ukraine

Ukraine is facing a severe shortage of funding to sustain its armed forces and economy afloat, after almost four years of the ongoing invasion by Moscow.

For Europe, the solution to plugging Kyiv's funding gap of €135.7bn for the next two years rests with frozen Russian assets sitting in Belgian bank Euroclear, and EU leaders aim to give it the green light at their EU leaders' conference next week.

Authorities in Russia caution the EU plan would be an illegal seizure, and the Central Bank of Russia stated on Friday it was initiating legal action against Euroclear in a Moscow court prior to a conclusive plan is made.

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

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

Brussels and Kyiv argue that money should be used to reconstruct what Russia has laid waste to: EU officials calls it a "loan for reparations" and has devised a plan to prop up Ukraine's economy amounting to €90bn.

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

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

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

The Belgian government is concerned it will be left with an enormous bill if it all backfires, and Euroclear CEO Valérie Urbain says using the assets could "destabilise the international financial system".

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

The leader of Belgium Bart de Wever has presented the EU with a series of "pragmatic, fair, and legitimate conditions" before he will endorse the reconstruction loan scheme, and he has left open the possibility of legal action if it "poses significant risks" for his country.

What is the EU's Strategy?

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

So far the EU has held off touching the frozen capital directly but since last year has transferred the "windfall profits" from them to Ukraine. In 2024 that was €3.7bn. Legally, using the revenue is considered safe as Russia is under sanction and the proceeds are not Russian sovereign property.

But global military support for Ukraine has fallen significantly in 2025, and Europe has struggled to compensate for the deficit resulting from the US decision to all but stop funding Ukraine under President Donald Trump.

There are at the moment two EU proposals seeking to supplying Ukraine with €90bn, to pay for a majority of its funding needs.

• The first is to raise the money on the markets, backed by the EU budget as a surety. This is Belgium's favored solution but it requires a agreement by all by EU leaders and that would be difficult when Budapest and Bratislava are against funding Ukraine's military.
• This makes the other option loaning Ukraine cash from the Russian assets, which were originally held in securities but have now mostly been converted into cash. That capital is an asset of Euroclear deposited at the European Central Bank.

Brussels' executive arm recognizes Belgium has valid worries and says it is confident it has dealt with them.

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

Should Euroclear suffer a loss of its own assets in Russia, that would be offset 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 recognized in the EU.

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

Heretofore they have had to vote by consensus every six months to extend 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 remain frozen as long as an "direct danger to the financial well-being of the union" continues.

The Reasons Belgium is Not Yet Satisfied

The Belgian government is adamant it remains a committed partner of Ukraine, but sees regulatory pitfalls in the plan and is concerned about being left to handle the fallout if things fail.

A typically divided political landscape in this case has come together in support of Prime Minister Bart de Wever, who is facing pressure from European colleagues.

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

While the EU might be able to secure sufficient protections for the loan itself, Belgium worries about an further exposure of being exposed to extra legal costs.

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

"Banks need to adhere to prudential rules and shouldn't make one enormous loan. Now the EU is instructing Euroclear to do exactly that.

"What is the purpose of these banking laws? It's because we want banks to be solvent. And if things fail it would be up to Belgium to bail out Euroclear. That's an additional reason why it's so important for Belgium to obtain water-tight guarantees for Euroclear."

Europe In a Difficult Position from Every Direction

Time is of the essence, state several EU member states including those bordering Russia such as the Baltics, Finland and Poland. They argue the scheme involving immobilized capital is "the financially feasible and practically possible solution".

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

While Russia is unyielding its money should not be touched, there are added concerns among leaders in Europe that the US may want to employ Russia's blocked funds differently, as part of its own peace plan.

Zelensky has stated 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 potential collaboration.

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