Russia Responds at the EU's Proposal to Loan Frozen Moscow's Cash to Kyiv

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

For Europe, the answer to filling Kyiv's financial shortfall of €135.7bn for the following biennium is found in Moscow's immobilized funds located within Belgian bank Euroclear, and European Union officials hope to finalize the plan at their EU leaders' conference next week.

Moscow's representatives state the EU plan would be an illegal seizure, and Russia's central bank stated on Friday it was initiating legal action against Euroclear in a Moscow court even before a final decision is made.

'Appropriate' to Employ Russia's Assets, Say Ukraine and the EU

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

European and Ukrainian authorities maintain that money should be used to reconstruct what Russia has laid waste to: The European Commission refers to it as a "reconstruction loan" and has come up with a plan to bolster Ukraine's economy amounting to €90bn.

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

Germany's leader Friedrich Merz states the assets will "allow Ukraine to protect itself efficiently against any future Russian attacks".

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

The Belgian government is anxious it will be saddled with an huge bill if it all goes wrong, and Euroclear head Valérie Urbain says using the assets could "disrupt the world's financial order".

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

The leader of Belgium Bart de Wever has set the EU a series of "rational, reasonable, and justified conditions" before he will agree to the reconstruction loan scheme, and he has left open the possibility of legal action if it "presents significant risks" for his country.

What is the EU's Proposal?

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

Previously the EU has refrained from using the assets themselves directly but since last year has paid the "extraordinary revenues" from them to Ukraine. In 2024 that amounted to €3.7bn. Juridically, using the revenue is seen as less risky as Russia is subject to sanctions and the returns are not Russian sovereign property.

But global military support for Ukraine has slipped dramatically in 2025, and Europe has found it difficult to compensate for the deficit resulting from the US decision to virtually halt funding Ukraine under President Donald Trump.

There are currently two EU plans aimed at providing Ukraine with €90bn, to pay for a majority of its financial requirements.

• The first is to raise the money on the markets, guaranteed by the EU budget as a surety. This is Belgium's preferred option but it demands a consensus by EU leaders and that would be difficult when Hungary and Slovakia oppose funding Ukraine's military.
• That leaves loaning Ukraine cash from the Moscow's immobilized capital, which were at first held in financial instruments but have now predominantly been converted into cash. That funding is Euroclear property deposited at the European Central Bank.

The EU's executive recognizes Belgium has justified fears and says it is confident it has resolved them.

The scheme 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, the shortfall would be covered from assets belonging to Russia's own settlement agency which are in the EU.

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

In a key development, EU ambassadors are poised to endorse on Friday to freeze indefinitely Russia's central bank assets held in Europe indefinitely.

Previously 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 emergency clause under Article 122 of the EU Treaties so the assets stay blocked as long as an "immediate threat to the economic interests of the union" continues.

Why Belgium is Still Not On Board

Brussels is firm it remains a strong supporter of Ukraine, but identifies juridical dangers in the plan and is concerned about being shouldering the fallout if things go wrong.

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

"Belgium is a small economy. Belgian GDP is about €565bn – imagine if it would need to carry a €185bn bill," notes Veerle Colaert, academic specializing in financial regulation at KU Leuven University.

Although the EU might be able to arrange adequate guarantees for the loan itself, Belgium worries about an additional danger of being subject to extra fines or liabilities.

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

"Lenders need to comply with stability regulations and shouldn't make one enormous loan. Now the EU is telling Euroclear to do exactly that.

"What is the purpose of these financial regulations? It's because we want banks to be secure. And if things turn sour it would be up to Belgium to rescue Euroclear. That's a further cause why it's so crucial for Belgium to obtain water-tight protections for Euroclear."

Europe Facing Strain from Every Direction

Time is of the essence, warn a group of EU member states including those closest to Russia such as the Baltics, Finland and Poland. They believe the frozen assets plan is "the most economically realistic and politically realistic solution".

"It is a decisive moment for us," warns 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 succeed in a week's time".

Although Russia is unyielding its money should not be touched, there are additional apprehensions among EU officials that the US may want to deploy Russia's frozen billions in another way, as part of its own peace plan.

Zelensky has stated Ukraine is coordinating with Europe and the US on a rebuilding fund, but he is also aware the US has been holding discussions with Russia about future co-operation.

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