Russia Hits Back at Europe's Plan to Lend Immobilized Russian Funds to Ukraine

Ukraine is running out of financial resources to maintain its military and economy, after close to 48 months of full-scale conflict with Russia.

From the EU's perspective, the answer to addressing Kyiv's financial shortfall of €135.7bn for the following biennium lies in Moscow's immobilized funds sitting in Belgian bank Euroclear, and Brussels hope to give it the green light at their Brussels summit next week.

Russian officials caution the EU plan would be an confiscation, and Russia's central bank announced on Friday it was initiating legal action against Euroclear in a Moscow court ahead of a final decision is made.

'Appropriate' to Employ Russia's Assets, Argue European and Ukrainian Officials

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

The EU and Ukraine contend that that capital should be used to reconstruct what Russia has laid waste to: The European Commission refers to it as a "reconstruction loan" and has devised a plan to bolster Ukraine's economy to the tune of €90bn.

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

German Chancellor Friedrich Merz states the assets will "help Ukraine to shield itself successfully against any future Russian attacks".

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

The Belgian government is anxious it will be left with an huge bill if it all fails, and Euroclear CEO Valérie Urbain argues using the assets could "destabilise the world's financial order".

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

Belgian Prime Minister Bart de Wever has presented the EU with a series of "pragmatic, fair, and legitimate conditions" before he will accept the reconstruction loan scheme, and he has not excluded legal action if it "poses significant risks" for his country.

Explaining the EU's Strategy?

European Union officials is under pressure ahead of next Thursday's summit to agree on a compromise that Belgium can accept.

Until now the EU has held off accessing the frozen capital directly but for the past year has transferred the "excess income" from them to Ukraine. In 2024 that amounted to €3.7bn. From a legal standpoint, using the revenue is seen as permissible as Russia is sanctioned and the returns are not Russian sovereign property.

But international military aid for Ukraine has declined sharply in 2025, and Europe has struggled to compensate for the shortfall left by the US decision to largely cease funding Ukraine under President Donald Trump.

There are currently two EU options seeking to furnishing Ukraine with €90bn, to cover a majority of its funding needs.

• The first is to raise the money on financial markets, backed by the EU budget as a surety. This is Belgium's preferred option but it demands a unanimous vote by EU leaders and that would be difficult when Budapest and Bratislava object to funding Ukraine's military.
• The alternative is lending Ukraine cash from the Russian assets, which were originally held in bonds but have now predominantly matured into cash. That capital is owned by Euroclear located within the European Central Bank.

The EU's executive accepts Belgium has valid worries and says it is assured it has resolved them.

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

If Euroclear face a financial hit 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.

Should Russia targeted Belgium itself, any ruling 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 indefinitely.

Previously they have had to vote all together every six months to continue the freeze, which could have meant a constant risk to Belgium.

The EU ambassadors are planning to use an special provision under Article 122 of the EU Treaties so the assets stay blocked as long as an "direct danger to the financial well-being of the union" continues.

Why Belgium is Not Yet Satisfied

Brussels is insistent it remains a strong supporter of Ukraine, but perceives regulatory pitfalls in the plan and fears being shouldering the repercussions if things do not work out.

A usually divided political landscape in this case has united behind Prime Minister Bart de Wever, who is being pressured from European colleagues.

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

Although the EU might be able to secure enough guarantees for the loan itself, Belgium worries about an additional danger of being vulnerable to extra damages or penalties.

Prof Colaert also argues the requirement for Euroclear to grant a loan to the EU would contravene EU banking regulations.

"Financial institutions need to follow prudential rules and shouldn't concentrate risk. Now the EU is telling Euroclear to do just that.

"What is the purpose of these bank rules? It's because we want banks to be secure. And if things fail it would be up to Belgium to rescue Euroclear. That's another reason why it's so crucial for Belgium to obtain absolute assurances for Euroclear."

EU Leaders Facing Strain from Multiple Fronts

There is no time to lose, caution a group of EU member states including those closest to Russia such as the Baltics, Finland and Poland. They maintain the frozen assets plan is "the most financially feasible and politically realistic solution".

"This is a crucial test for us," warns leading German conservative MP Norbert Röttgen. "If the plan collapses, I don't know what we'll do next. That's why we have to finalize the deal in a week's time".

While Russia is insistent its money should not be accessed, there are added concerns among leaders in Europe that the US may want to use Russia's immobilized billions differently, as part of its own diplomatic proposal.

Zelensky has said Ukraine is in discussions with Europe and the US on a recovery fund, but he is also aware the US has been engaging with Russia about potential collaboration.

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