Russia Retaliates at the EU's Proposal to Loan Frozen Russian Funds to Kyiv

Kyiv remains depleting its cash to sustain its armed forces and economy, after nearly four years of Russia's full-scale war.

For Europe, the remedy to plugging Kyiv's financial shortfall of €135.7bn for the coming 24 months lies in frozen Russian assets sitting in Belgian bank Euroclear, and European Union officials aim to finalize the plan at their EU leaders' conference next week.

Russian officials caution the EU plan would be an illegal seizure, and the Central Bank of Russia declared on Friday it was taking to court Euroclear in a Moscow court prior to a conclusive plan is made.

'Only Fair' to Employ Russia's Assets, Assert Kyiv and Brussels

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

The EU and Ukraine maintain that those funds should be used to restore what Russia has devastated: The European Commission calls it a "reconstruction loan" and has devised a plan to support Ukraine's economy amounting to €90bn.

"It is appropriate that the assets frozen from Russia should be used to reconstruct what Russia has devastated – and that that capital then becomes Ukraine's," states Ukrainian President Volodymyr Zelensky.

Germany's leader Friedrich Merz argues the assets will "allow Ukraine to protect itself successfully against future Russian attacks".

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

Belgium is worried it will be saddled with an huge bill if it all goes wrong, and Euroclear chief executive Valérie Urbain argues using the assets could "undermine the world's financial order".

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

The leader of Belgium Bart de Wever has given Brussels a series of "rational, reasonable, and justified conditions" before he will accept the reparations plan, and he has left open the possibility of legal action if it "carries significant risks" for his country.

What is the EU's Plan?

The EU is under pressure ahead of next Thursday's summit to finalize a arrangement that Belgium can agree to.

Previously the EU has avoided accessing the principal funds directly but starting in 2024 has transferred the "extraordinary revenues" from them to Ukraine. In 2024 that amounted to €3.7bn. From a legal standpoint, using the interest is deemed less risky as Russia is under sanction and the proceeds are not property of the Russian state.

But foreign defense assistance for Ukraine has fallen significantly in 2025, and Europe has had trouble trying to compensate for the shortfall caused by the US decision to all but stop funding Ukraine under President Donald Trump.

There are at the moment two EU plans designed to furnishing Ukraine with €90bn, to finance two-thirds of its budgetary necessities.

• The first is to borrow the funds on financial markets, backed by the EU budget as a collateral. This is Belgium's favored solution but it needs a agreement by all by EU leaders and that would be difficult when two member states oppose funding Ukraine's military.
• The alternative is lending Ukraine cash from the Russian assets, which were at first held in securities but have now predominantly been converted into cash. That money is Euroclear property deposited at the European Central Bank.

The European Commission acknowledges Belgium has legitimate concerns and says it is assured it has dealt with them.

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

If Euroclear incur losses of its own assets in Russia, that would be offset from assets belonging to Russia's own clearing house which are in the EU.

If Russia targeted Belgium itself, any decision by a Russian court would not be accepted in the EU.

In a key development, EU ambassadors are set to approve on Friday to freeze indefinitely Russia's central bank assets held in Europe indefinitely.

Heretofore they have had to vote unanimously every six months to renew the freeze, which could have meant a ongoing risk to Belgium.

The EU ambassadors are planning to use an emergency clause under Article 122 of the EU Treaties so the assets remain frozen as long as an "clear risk to the economic security of the union" continues.

The Reasons Belgium is Remains On Board

Belgium is firm it remains a staunch ally of Ukraine, but sees juridical dangers in the plan and is concerned about being shouldering the consequences if things do not work out.

A normally divided political landscape in this case has come together in support of Prime Minister Bart de Wever, who is under pressure from other European officials.

"Belgium has a modest-sized economy. Belgian GDP is around €565bn – imagine if it would need to shoulder a €185bn bill," notes Veerle Colaert, academic specializing in financial regulation at KU Leuven University.

Although the EU might be able to secure adequate guarantees for the loan itself, Belgium worries about an added risk of being exposed to extra fines or liabilities.

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

"Banks need to comply with capital and liquidity requirements and shouldn't put all their eggs in one basket. Now the EU is instructing Euroclear to do exactly that.

"What is the purpose of these financial regulations? It's because we want banks to be secure. And if things go wrong it would become the responsibility of Belgium to rescue Euroclear. That's an additional reason why it's so vital for Belgium to obtain water-tight protections for Euroclear."

Europe Facing Strain from All Sides

Time is of the essence, state 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 achievable solution".

"It is a decisive moment for us," states leading German conservative MP Norbert Röttgen. "If the plan collapses, I don't know what we'll do afterwards. That's why we have to finalize the deal in a week's time".

Although Russia is insistent its money should not be accessed, there are additional apprehensions among leaders in Europe that the US may want to deploy Russia's blocked funds differently, as part of its own diplomatic proposal.

Zelensky has said Ukraine is coordinating with Europe and the US on a reconstruction 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