Russia Retaliates at Europe's Plan to Lend Frozen Russian Assets to Kyiv

Kyiv remains depleting its cash to sustain its military and economy afloat, after nearly four years of the ongoing invasion by Moscow.

For Europe, the remedy to filling Ukraine's budget hole of €135.7bn for the next two years lies in frozen Russian assets sitting in Belgian bank Euroclear, and Brussels hope to sign that off at their EU leaders' conference next week.

Moscow's representatives state the EU plan would be an confiscation, and the Central Bank of Russia stated on Friday it was taking to court Euroclear in a Moscow court prior to a definitive agreement is made.

'Only Fair' to Use Moscow's Assets, Say Ukraine and the EU

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

European and Ukrainian authorities maintain that that capital should be used to reconstruct what Russia has laid waste to: The European Commission refers to it as a "loan for reparations" and has proposed a plan to prop up Ukraine's economy amounting to €90bn.

"It's only fair that the assets frozen from Russia should be used to reconstruct what Russia has destroyed – and that that capital then becomes Ukraine's," says Ukrainian President Volodymyr Zelensky.

German Chancellor Friedrich Merz says the assets will "enable Ukraine to protect itself efficiently against future Russian attacks".

The legal move by Moscow was expected in Brussels. But it is not just Moscow that is concerned.

Authorities in Brussels is anxious it will be left with an huge bill if it all backfires, and Euroclear CEO Valérie Urbain warns using the assets could "undermine the global financial architecture".

Euroclear also has an roughly €16-17bn immobilised 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 refused to rule out legal action if it "poses significant risks" for his country.

What is the EU's Plan?

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

Until now the EU has held off touching the principal funds directly but starting in 2024 has directed the "extraordinary revenues" from them to Ukraine. In 2024 that totaled €3.7bn. Legally, using the interest is considered permissible as Russia is subject to sanctions and the returns are not property of the Russian state.

But foreign defense assistance for Ukraine has slipped dramatically in 2025, and Europe has had trouble trying to make up the deficit resulting from the US decision to largely cease funding Ukraine under President Donald Trump.

There are presently two EU options seeking to providing Ukraine with €90bn, to pay for a large portion of its financial requirements.

• The first is to raise the money on capital markets, guaranteed by the EU budget as a collateral. This is Belgium's favored solution but it requires a unanimous vote by EU leaders and that would be problematic when two member states object to funding Ukraine's military.
• The alternative is providing a loan of Ukraine cash from the Moscow's immobilized capital, which were at first held in financial instruments but have now largely been converted into cash. That capital is an asset of Euroclear located within the European Central Bank.

The European Commission recognizes Belgium has valid worries and says it is assured it has resolved them.

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

Should Euroclear face a financial hit of its own assets in Russia, the loss would be compensated from assets belonging to Russia's own settlement agency which are in the EU.

In the event that Russia took legal action against Belgium itself, any ruling by a Russian court would not be enforced in the EU.

As an important step, EU ambassadors are expected to agree on Friday to freeze indefinitely Russia's central bank assets held in Europe permanently.

Heretofore they have had to vote by consensus every six months to continue the freeze, which could have meant a repeated risk to Belgium.

The EU ambassadors are planning to use an extraordinary measure under Article 122 of the EU Treaties so the assets stay blocked as long as an "clear risk to the economic security of the union" continues.

Why Belgium is Not Yet Satisfied

The Belgian government is firm it remains a staunch ally of Ukraine, but sees regulatory pitfalls in the plan and is concerned about being shouldering the repercussions if things go wrong.

A typically partisan political environment in this case has come together in support of Prime Minister Bart de Wever, who is being pressured from other European officials.

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

Although the EU might be able to arrange enough assurances for the loan itself, Belgium worries about an further exposure of being exposed to extra legal costs.

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

"Financial institutions need to follow stability regulations 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 bank rules? It's because we want banks to be solvent. And if things fail it would fall to Belgium to bail out Euroclear. That's a further cause why it's so crucial for Belgium to secure ironclad guarantees for Euroclear."

Europe Facing Strain from Every Direction

There is no time to lose, caution a group of EU member states including those bordering Russia such as the Baltics, Finland and Poland. They believe the frozen assets plan is "the economically realistic and practically possible 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 next. That's why we have to finalize the deal in a week's time".

While Russia is adamant its money should not be used, there are additional apprehensions among leaders in Europe that the US may want to deploy Russia's blocked funds in another way, as part of its own peace initiative.

Zelensky has indicated Ukraine is working with Europe and the US on a rebuilding fund, but he is also cognizant the US has been talking to Russia about possible partnership.

A preliminary version 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