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

Kyiv remains running out of cash to keep going its military and economy, after close to 48 months of the ongoing invasion by Moscow.

From the EU's perspective, the answer to plugging Ukraine's funding gap of €135.7bn for the next two years rests with assets belonging to Russia that are frozen sitting in Belgian bank Euroclear, and Brussels seek to sign that off at their EU leaders' conference next week.

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

'Only Fair' to Utilize Russia's Assets, Assert European and Ukrainian Officials

Overall, Russia has about €210bn of its funds blocked in the EU, and €185bn of that is held by Euroclear.

European and Ukrainian authorities maintain that those funds should be used to restore what Russia has laid waste to: The European Commission calls it a "reconstruction loan" and has come up with a plan to bolster Ukraine's economy valued at €90bn.

"It's only fair that the assets frozen from Russia should be used to rebuild what Russia has devastated – and that those funds then becomes ours," says Ukraine's Volodymyr Zelensky.

German Chancellor Friedrich Merz states the assets will "allow Ukraine to defend itself successfully against subsequent Russian attacks".

Russia's court action was foreseen in Brussels. But it is not only Moscow that is dissatisfied.

Belgium is concerned it will be left with an huge bill if it all fails, and Euroclear chief executive Valérie Urbain says using the assets could "destabilise the international financial system".

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

Belgian Prime Minister Bart de Wever has given Brussels 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 Proposal?

European Union officials is working to the wire prior to next Thursday's summit to finalize a compromise that Belgium can agree to.

So far the EU has held off using the assets themselves directly but starting in 2024 has paid the "extraordinary revenues" from them to Ukraine. In 2024 that was €3.7bn. Legally, using the interest is deemed permissible as Russia is subject to sanctions and the proceeds are not Moscow's sovereign assets.

But foreign defense assistance for Ukraine has slipped dramatically in 2025, and Europe has struggled to compensate for the gap resulting from the US decision to largely cease funding Ukraine under President Donald Trump.

There are currently two EU options aimed at supplying Ukraine with €90bn, to pay for two-thirds of its funding needs.

• One is to borrow the funds on capital markets, guaranteed by the EU budget as a collateral. This is Belgium's preferred option but it demands a consensus by EU leaders and that would be problematic when Budapest and Bratislava object to funding Ukraine's military.
• That leaves providing a loan of Ukraine cash from the Moscow's immobilized capital, which were at first held in financial instruments but have now largely turned into cash. That funding is owned by Euroclear deposited at the European Central Bank.

The European Commission accepts Belgium has legitimate concerns and states it is confident it has addressed them.

The scheme 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 clearing house which are in the EU.

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

As an important step, 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 extend the freeze, which could have meant a repeated risk to Belgium.

The EU ambassadors are set 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.

The Reasons Belgium is Not Yet On Board

The Belgian government is insistent it remains a committed partner of Ukraine, but perceives regulatory pitfalls in the plan and is concerned about being left to handle the consequences if things fail.

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

"Belgium has a modest-sized economy. Belgian GDP is approximately €565bn – think about if it would need to carry a €185bn bill," says Veerle Colaert, professor of financial law at KU Leuven University.

While the EU might be able to secure enough guarantees for the loan itself, Belgium is concerned about an additional danger of being exposed to extra fines or liabilities.

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

"Financial institutions need to comply with capital and liquidity requirements and shouldn't make one enormous loan. Now the EU is telling Euroclear to do exactly that.

"What is the purpose of these bank rules? It's because we want banks to be stable. And if things fail it would be up to Belgium to rescue Euroclear. That's an additional reason why it's so crucial for Belgium to get water-tight assurances for Euroclear."

Europe Facing Strain from Every Direction

The situation is urgent, caution seven EU member states including those bordering Russia such as the Baltics, Finland and Poland. They argue the proposal to use Russian funds is "a fiscally viable and politically realistic solution".

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

Although Russia is insistent its money should not be used, there are additional apprehensions among European figures that the US may want to use Russia's blocked funds differently, as part of its own diplomatic proposal.

Zelensky has indicated Ukraine is coordinating with Europe and the US on a rebuilding fund, but he is also mindful the US has been talking to Russia about potential collaboration.

An initial document of the US peace plan suggested $100bn of Russia's frozen assets being used by the US for reconstruction, with the US {taking|receiving