Russia Hits Back at Europe's Scheme to Lend Frozen Russian Cash to Ukraine

Ukraine is running out of financial resources to keep going its armed forces and economy afloat, after close to 48 months of Russia's full-scale war.

For Europe, the solution to filling Ukraine's budget hole of €135.7bn for the next two years rests with Moscow's immobilized funds located within Belgian bank Euroclear, and European Union officials seek to sign that off at their EU leaders' conference next week.

Moscow's representatives warn the EU plan would be an confiscation, and Moscow's monetary authority announced on Friday it was suing Euroclear in a Moscow court even before a definitive agreement is made.

'Only Fair' to Employ Moscow's Funds, Argue Kyiv and Brussels

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

Brussels and Kyiv maintain that those funds should be used to rebuild what Russia has devastated: The European Commission calls it a "reparations loan" and has devised a plan to prop up Ukraine's economy amounting to €90bn.

"It's only fair that Moscow's blocked funds should be used to rebuild what Russia has destroyed – and that those funds then becomes Ukraine's," says Ukraine's Volodymyr Zelensky.

Chancellor Friedrich Merz argues the assets will "allow Ukraine to defend itself effectively against any future 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 enormous bill if it all backfires, and Euroclear CEO Valérie Urbain says using the assets could "undermine the global financial architecture".

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

Belgium's PM Bart de Wever has given Brussels a series of "logical, sensible, and warranted conditions" before he will endorse the reconstruction loan scheme, and he has refused to rule out legal action if it "presents significant risks" for his country.

What is the EU's Plan?

European Union officials is racing against time ahead of next Thursday's summit to come up with a compromise that Belgium can support.

Until now the EU has refrained from accessing the principal funds directly but since last year has directed the "windfall profits" from them to Ukraine. In 2024 that totaled €3.7bn. From a legal standpoint, using the interest is seen as safe as Russia is subject to sanctions and the returns are not property of the Russian state.

But global military support for Ukraine has fallen significantly in 2025, and Europe has found it difficult to make up the deficit caused by the US decision to all but stop funding Ukraine under President Donald Trump.

There are presently two EU proposals aimed at furnishing Ukraine with €90bn, to finance a majority of its financial requirements.

• One is to borrow the funds on the markets, backed by the EU budget as a surety. This is Belgium's first choice but it demands a agreement by all by EU leaders and that would be challenging when two member states are against funding Ukraine's military.
• That leaves lending Ukraine cash from the Moscow's immobilized capital, which were originally held in bonds but have now largely been converted into cash. That funding is Euroclear property held in the European Central Bank.

The EU's executive accepts Belgium has justified fears and says it is convinced it has dealt with them.

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

If Euroclear suffer a loss of its own assets in Russia, that would be offset from assets belonging to Russia's own settlement agency which are in the EU.

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

In a key development, EU ambassadors are poised to endorse on Friday to immobilise Russia's central bank assets held in Europe for the foreseeable future.

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

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

The Reasons Belgium is Not Yet On Board

The Belgian government is adamant it remains a strong supporter of Ukraine, but perceives legal risks in the plan and worries about being left to handle the fallout if things fail.

A typically partisan political environment in this case has united behind Prime Minister Bart de Wever, who is facing pressure from European colleagues.

"Belgium is a small economy. Belgian GDP is approximately €565bn – imagine if it would need to bear a €185bn bill," notes Veerle Colaert, expert in financial law at KU Leuven University.

While the EU might be able to arrange enough protections for the loan itself, Belgium worries about an additional danger of being exposed to extra damages or penalties.

Prof Colaert also contends the demand for Euroclear to grant 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 asking Euroclear to do precisely that.

"What is the purpose of these banking laws? It's because we want banks to be stable. And if things turn sour it would become the responsibility of Belgium to rescue Euroclear. That's an additional reason why it's so important for Belgium to secure ironclad assurances for Euroclear."

Europe In a Difficult Position from Every Direction

Time is of the essence, state several EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They maintain the proposal to use Russian funds is "a economically realistic and politically achievable solution".

"It is a decisive moment for us," says leading German conservative MP Norbert Röttgen. "If we fail, I don't know what we'll do afterwards. That's why we have to reach an agreement in a week's time".

While Russia is insistent its money should not be touched, there are additional apprehensions among EU officials that the US may want to use Russia's frozen billions for another purpose, as part of its own peace plan.

Zelensky has indicated Ukraine is working with Europe and the US on a recovery fund, but he is also mindful the US has been holding discussions with Russia about potential collaboration.

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