Russia Retaliates at the EU's Plan to Lend Frozen Moscow's Cash to Kyiv

Kyiv remains facing a severe shortage of cash to maintain its armed forces and economy, after nearly four years of the ongoing invasion by Moscow.

From the EU's perspective, the remedy to filling Kyiv's financial shortfall of €135.7bn for the next two years is found in assets belonging to Russia that are frozen located within Belgian bank Euroclear, and Brussels hope to sign that off at their Brussels summit next week.

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

'Only Fair' to Utilize Russia's Assets, Argue Ukraine and the EU

In total, Russia has about €210bn of its funds frozen 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 devastated: The European Commission calls it a "reconstruction loan" and has devised a plan to prop up Ukraine's economy to the tune of €90bn.

"It's only fair that Russia's frozen assets should be used to reconstruct what Russia has devastated – and that that capital then becomes Ukraine's," remarks Ukraine's Volodymyr Zelensky.

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

Moscow's lawsuit was anticipated in Brussels. But it is not only Moscow that is dissatisfied.

Belgium is worried it will be left with an huge bill if it all goes wrong, and Euroclear head Valérie Urbain argues using the assets could "undermine the international financial system".

Euroclear also has an roughly €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 not excluded legal action if it "poses significant risks" for his country.

The Details of the EU's Strategy?

Brussels is working to the wire before next Thursday's summit to finalize a compromise that Belgium can agree to.

Until now the EU has refrained from accessing the assets themselves directly but since last year has transferred the "windfall profits" from them to Ukraine. In 2024 that amounted to €3.7bn. Legally, using the revenue is considered less risky as Russia is under sanction and the proceeds are not Russian sovereign property.

But international military aid for Ukraine has slipped dramatically in 2025, and Europe has had trouble trying to cover the gap resulting from the US decision to virtually halt funding Ukraine under President Donald Trump.

There are at the moment two EU options aimed at furnishing Ukraine with €90bn, to pay for a large portion of its budgetary necessities.

• The first is to secure the capital on capital markets, backed by the EU budget as a surety. This is Belgium's preferred option but it needs a consensus 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 frozen Russian funds, which were at first held in financial instruments but have now predominantly been converted into cash. That money is Euroclear property located within the European Central Bank.

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

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

If Euroclear suffer a loss of its own assets in Russia, the shortfall would be covered from assets belonging to Russia's own clearing house which are in the EU.

In the event that Russia went after Belgium itself, any ruling by a Russian court would not be accepted 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 for the foreseeable future.

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 special provision under Article 122 of the EU Treaties so the assets stay blocked as long as an "immediate threat to the economic security of the union" continues.

Why Belgium is Still Not Convinced

The Belgian government is insistent it remains a staunch ally of Ukraine, but identifies regulatory pitfalls in the plan and is concerned about being forced to deal with the repercussions if things do not work out.

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

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

While the EU might be able to arrange sufficient protections for the loan itself, Belgium is concerned about an further exposure of being vulnerable to extra legal costs.

Prof Colaert also believes the stipulation for Euroclear to provide a loan to the EU would violate EU banking regulations.

"Financial institutions need to adhere to stability regulations and shouldn't make one enormous loan. Now the EU is instructing Euroclear to do precisely that.

"Why do we have these bank rules? It's because we want banks to be secure. And if things go wrong it would fall to Belgium to save Euroclear. That's an additional reason why it's so important for Belgium to obtain absolute guarantees for Euroclear."

The European Union In a Difficult Position from Every Direction

The situation is urgent, warn several EU member states including those closest to Russia such as the Baltics, Finland and Poland. They believe the frozen assets plan is "the most fiscally viable and politically realistic solution".

"This is a crucial test for us," says leading German conservative MP Norbert Röttgen. "If we fail, I don't know what we'll do subsequently. That's why we have to succeed in a week's time".

While Russia is unyielding its money should not be touched, there are further worries among European figures that the US may want to employ Russia's frozen billions differently, as part of its own diplomatic proposal.

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

A preliminary version of the US peace plan mentioned $100bn of Russia's immobilized capital being used by the US for reconstruction, with the US {taking|receiving