Moscow Responds at Europe's Proposal to Loan Frozen Moscow's Funds to Kyiv

Ukraine is facing a severe shortage of funding to sustain its military and economy, after nearly four years of Russia's full-scale war.

From the EU's perspective, the solution to addressing Kyiv's funding gap of €135.7bn for the next two years is found in Moscow's immobilized funds located within Belgian bank Euroclear, and Brussels hope 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 initiating legal action against Euroclear in a Moscow court ahead of a conclusive plan is made.

'Appropriate' to Employ Moscow's Funds, Say Ukraine and the EU

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

The EU and Ukraine maintain that that capital should be used to restore what Russia has devastated: EU officials terms it a "reparations loan" and has devised a plan to bolster Ukraine's economy to the tune of €90bn.

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

Germany's leader Friedrich Merz states the assets will "allow Ukraine to defend itself effectively against subsequent Russian attacks".

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

Belgium is worried it will be left with an massive bill if it all fails, and Euroclear chief executive Valérie Urbain says using the assets could "disrupt the global financial architecture".

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

The leader of Belgium Bart de Wever has set the EU a series of "logical, sensible, and warranted conditions" before he will accept the reconstruction loan scheme, and he has left open the possibility of legal action if it "poses significant risks" for his country.

Explaining the EU's Strategy?

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

Until now the EU has refrained from touching the principal funds directly but for the past year has paid the "excess income" from them to Ukraine. In 2024 that totaled €3.7bn. Legally, using the revenue is considered less risky as Russia is under sanction and the proceeds are not property of the Russian state.

But global military support for Ukraine has declined sharply in 2025, and Europe has had trouble trying to make up the gap left by the US decision to largely cease funding Ukraine under President Donald Trump.

There are at the moment two EU options designed to supplying Ukraine with €90bn, to pay for two-thirds of its budgetary necessities.

• Option one is to borrow the funds on financial markets, guaranteed by 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 difficult when Budapest and Bratislava oppose funding Ukraine's military.
• The alternative is providing a loan of Ukraine cash from the frozen Russian funds, which were initially held in bonds but have now predominantly been converted into cash. That capital is owned by Euroclear held in the European Central Bank.

The European Commission accepts Belgium has justified fears and states it is convinced it has addressed them.

The scheme is for Belgium to be safeguarded with a guarantee applying to all the €210bn of Russian assets in the EU.

Should Euroclear suffer a loss of its own assets in Russia, the loss would be compensated from assets belonging to Russia's own clearing house which are in the EU.

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

As an important step, EU ambassadors are poised to endorse 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 renew the freeze, which could have meant a ongoing risk to Belgium.

The EU ambassadors are expected to use an emergency clause under Article 122 of the EU Treaties so the assets remain frozen as long as an "clear risk to the financial well-being of the union" continues.

Why Belgium is Not Yet Satisfied

The Belgian government is insistent it remains a staunch ally of Ukraine, but identifies juridical dangers in the plan and fears being shouldering the fallout if things do not work out.

A normally fractured political scene in this case has come together in support of Prime Minister Bart de Wever, who is facing pressure from fellow EU leaders.

"The Belgian economy is not large. Belgian GDP is around €565bn – consider if it would need to carry a €185bn bill," notes Veerle Colaert, academic specializing in financial regulation at KU Leuven University.

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

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

"Lenders need to comply with prudential rules and shouldn't make one enormous loan. Now the EU is telling Euroclear to do just that.

"Why do we have these banking laws? It's because we want banks to be solvent. And if things turn sour it would be up to Belgium to save Euroclear. That's another reason why it's so vital for Belgium to get water-tight guarantees for Euroclear."

The European Union In a Difficult Position from All Sides

The situation is urgent, warn a group of EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They maintain the frozen assets plan is "the most financially feasible and politically achievable solution".

"It is a decisive moment for us," says 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 reach an agreement in a week's time".

Although Russia is adamant its money should not be used, there are added concerns among leaders in Europe that the US may want to employ Russia's frozen billions in another way, as part of its own peace plan.

Zelensky has said Ukraine is in discussions with Europe and the US on a reconstruction fund, but he is also mindful the US has been engaging with Russia about possible partnership.

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