Moscow Hits Back at Europe's Scheme to Loan Frozen Moscow's Assets to Kyiv

Kyiv remains facing a severe shortage of funding to maintain its military and economy afloat, after nearly four years of full-scale conflict with Russia.

In the view of European leaders, the remedy to plugging Ukraine's budget hole of €135.7bn for the coming 24 months is found in frozen Russian assets sitting in Belgian bank Euroclear, and European Union officials hope to finalize the plan at their Brussels summit next week.

Authorities in Russia state the EU plan would be an illegal seizure, and Moscow's monetary authority announced on Friday it was taking to court Euroclear in a Moscow court ahead of a definitive agreement is made.

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

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

The EU and Ukraine maintain that those funds should be used to reconstruct what Russia has laid waste to: The European Commission refers to it as a "loan for reparations" and has devised a plan to prop up Ukraine's economy valued at €90bn.

"It is only just that Russia's frozen assets should be used to rebuild what Russia has devastated – and that those funds then becomes Ukraine's," says Ukraine's Volodymyr Zelensky.

German Chancellor Friedrich Merz says the assets will "allow Ukraine to shield itself efficiently against any future Russian attacks".

The legal move by Moscow was foreseen in Brussels. But it is not just Moscow that is concerned.

The Belgian government is concerned it will be burdened by an huge bill if it all goes wrong, and Euroclear head Valérie Urbain argues using the assets could "destabilise the world's financial order".

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

Belgium's PM Bart de Wever has set the EU a series of "rational, reasonable, and justified conditions" before he will endorse the reconstruction loan scheme, and he has not excluded legal action if it "presents significant risks" for his country.

The Details of the EU's Strategy?

The EU is under pressure prior to next Thursday's summit to agree on a solution that Belgium can support.

Until now the EU has held off touching the assets themselves directly but starting in 2024 has transferred the "windfall profits" from them to Ukraine. In 2024 that was €3.7bn. Legally, using the interest is considered safe as Russia is under sanction and the proceeds are not property of the Russian state.

But international military aid for Ukraine has fallen significantly in 2025, and Europe has had trouble trying to compensate for the deficit resulting from the US decision to virtually halt funding Ukraine under President Donald Trump.

There are at the moment two EU proposals aimed at furnishing Ukraine with €90bn, to finance two-thirds of its financial requirements.

• The first is to raise the money on the markets, backed by the EU budget as a collateral. This is Belgium's favored solution but it needs a agreement by all by EU leaders and that would be problematic when Hungary and Slovakia oppose funding Ukraine's military.
• This makes the other option lending Ukraine cash from the Moscow's immobilized capital, which were initially held in securities but have now mostly been converted into cash. That money is owned by Euroclear deposited at the European Central Bank.

The European Commission recognizes Belgium has valid worries and says it is convinced it has resolved them.

The plan is for Belgium to be shielded with a insurance 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 clearing house which are in the EU.

In the event that Russia took legal action against Belgium itself, any ruling by a Russian court would not be accepted in the EU.

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

Heretofore they have had to vote unanimously every six months to extend the freeze, which could have meant a constant risk to Belgium.

The EU ambassadors are planning to use an emergency clause under Article 122 of the EU Treaties so the assets stay blocked as long as an "direct danger to the economic interests of the union" continues.

The Reasons Belgium is Remains On Board

Brussels is adamant it remains a committed partner of Ukraine, but sees regulatory pitfalls in the plan and worries 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 under pressure from other European officials.

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

While the EU might be able to secure adequate assurances for the loan itself, Belgium is concerned about an further exposure of being exposed to extra legal costs.

Prof Colaert also contends the demand for Euroclear to issue credit to the EU would breach EU banking regulations.

"Financial institutions need to comply with stability regulations and shouldn't make one enormous loan. Now the EU is asking Euroclear to do exactly 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 bail out Euroclear. That's an additional reason why it's so vital for Belgium to obtain water-tight protections for Euroclear."

Europe Facing Strain from Every Direction

There is no time to lose, caution several EU member states including those bordering Russia such as the Baltics, Finland and Poland. They argue the proposal to use Russian funds is "the most financially feasible and practically possible solution".

"This is a crucial test for us," warns leading German conservative MP Norbert Röttgen. "If we fail, 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 unyielding its money should not be used, there are added concerns among leaders in Europe that the US may want to employ Russia's immobilized billions differently, as part of its own diplomatic proposal.

Zelensky has indicated Ukraine is working with Europe and the US on a reconstruction fund, but he is also cognizant the US has been talking to Russia about potential collaboration.

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