Moscow Retaliates at the EU's Scheme to Loan Frozen Moscow's Funds to Ukraine
Kyiv remains running out of funding to maintain its armed forces and economy, after nearly four years of the ongoing invasion by Moscow.
In the view of European leaders, the remedy to addressing Kyiv's budget hole of €135.7bn for the coming 24 months rests with frozen Russian assets held by Belgian bank Euroclear, and EU leaders aim to give it the green light at their EU leaders' conference next week.
Russian officials 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 prior to a conclusive plan is made.
'Just' to Utilize Russia's Funds, Assert Ukraine and the EU
In total, Russia has about €210bn of its assets blocked in the EU, and €185bn of that is held by Euroclear.
The EU and Ukraine maintain that money should be used to restore what Russia has laid waste to: Brussels terms it a "reparations loan" and has proposed a plan to bolster Ukraine's economy valued at €90bn.
"It is only just that Moscow's blocked funds should be used to reconstruct what Russia has devastated – and that money then becomes ours," says Ukraine's Volodymyr Zelensky.
Chancellor Friedrich Merz argues the assets will "enable Ukraine to shield itself successfully against subsequent Russian attacks".
Russia's court action was foreseen in Brussels. But it is not just Moscow that is dissatisfied.
Authorities in Brussels is anxious it will be saddled with an huge bill if it all fails, and Euroclear head Valérie Urbain argues using the assets could "disrupt the world's financial order".
Euroclear also has an estimated €16-17bn locked in Russia.
The leader of Belgium Bart de Wever has set the EU a series of "logical, sensible, and warranted conditions" before he will endorse the reparations plan, and he has refused to rule out legal action if it "presents significant risks" for his country.
What is the EU's Proposal?
European Union officials is racing against time before next Thursday's summit to come up with a solution that Belgium can support.
So far the EU has avoided accessing the assets themselves directly but since last year has paid the "excess income" from them to Ukraine. In 2024 that totaled €3.7bn. Juridically, using the interest is deemed safe as Russia is under sanction and the returns are not Moscow's sovereign assets.
But international military aid for Ukraine has fallen significantly in 2025, and Europe has struggled to compensate for the gap caused by the US decision to all but stop funding Ukraine under President Donald Trump.
There are presently two EU plans designed to furnishing Ukraine with €90bn, to finance two-thirds of its financial requirements.
- Option one is to raise the money on capital markets, backed by the EU budget as a guarantee. This is Belgium's favored solution but it needs a consensus by EU leaders and that would be difficult when Budapest and Bratislava object to funding Ukraine's military.
- That leaves loaning Ukraine cash from the Russian assets, which were originally held in bonds but have now mostly turned into cash. That funding is an asset of Euroclear located within the European Central Bank.
Brussels' executive arm recognizes Belgium has valid worries and states it is convinced it has addressed them.
The proposal is for Belgium to be safeguarded with a guarantee applying to all the €210bn of Russian assets in the EU.
If Euroclear incur losses 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 took legal action against Belgium itself, any judgment by a Russian court would not be recognized in the EU.
In a key development, EU ambassadors are set to approve on Friday to freeze indefinitely Russia's central bank assets held in Europe indefinitely.
Until now they have had to vote by consensus every six months to continue the freeze, which could have meant a ongoing risk to Belgium.
The EU ambassadors are planning 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.
The Reasons Belgium is Not Yet On Board
Brussels is adamant it remains a strong supporter of Ukraine, but identifies juridical dangers in the plan and fears being shouldering the repercussions if things fail.
A usually partisan political environment in this case has rallied behind Prime Minister Bart de Wever, who is being pressured from other European officials.
"The Belgian economy is not large. Belgian GDP is approximately €565bn – consider if it would need to shoulder a €185bn bill," says Veerle Colaert, professor of financial law at KU Leuven University.
Although the EU might be able to arrange enough assurances for the loan itself, Belgium is concerned about an additional danger of being subject to extra damages or penalties.
Prof Colaert also believes the demand for Euroclear to provide a loan to the EU would violate EU banking regulations.
"Financial institutions need to comply with capital and liquidity requirements and shouldn't put all their eggs in one basket. Now the EU is asking Euroclear to do exactly that.
"Why do we have these banking laws? It's because we want banks to be secure. And if things turn sour it would be up to Belgium to bail out Euroclear. That's another reason why it's so vital for Belgium to obtain ironclad assurances for Euroclear."
The European Union Facing Strain from Multiple Fronts
The situation is urgent, warn several EU member states including those bordering Russia such as the Baltics, Finland and Poland. They believe the proposal to use Russian funds is "the economically realistic and practically possible solution".
"It is a decisive moment for us," states leading German conservative MP Norbert Röttgen. "If we fail, I don't know what we'll do afterwards. 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 added concerns among EU officials that the US may want to employ Russia's blocked funds for another purpose, as part of its own peace plan.
Zelensky has indicated Ukraine is coordinating with Europe and the US on a recovery fund, but he is also mindful the US has been holding discussions with Russia about future co-operation.
A preliminary version of the US peace plan suggested $100bn of Russia's blocked funds being used by the US for reconstruction, with the US {taking|receiving
