Russia Hits Back at the EU's Proposal to Loan Immobilized Russian Funds to Ukraine

Ukraine is running out of financial resources to keep going its military and economy afloat, after close to 48 months of the ongoing invasion by Moscow.

From the EU's perspective, the remedy to plugging Ukraine's financial shortfall of €135.7bn for the next two years lies in Moscow's immobilized funds sitting in Belgian bank Euroclear, and EU leaders seek to sign that off at their meeting in Brussels next week.

Russian officials state the EU plan would be an illegal seizure, and Moscow's monetary authority declared on Friday it was suing Euroclear in a Moscow court even before a final decision is made.

'Only Fair' to Employ Moscow's Funds, Say Ukraine and the EU

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

Brussels and Kyiv contend that those funds should be used to restore what Russia has devastated: EU officials calls it a "reparations 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 reconstruct what Russia has destroyed – and that money then becomes ours," remarks Ukraine's Volodymyr Zelensky.

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

Moscow's lawsuit was anticipated in Brussels. But it is not just Moscow that is unhappy.

The Belgian government is concerned it will be saddled with an enormous bill if it all backfires, and Euroclear head Valérie Urbain warns using the assets could "destabilise the global financial architecture".

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

The leader of Belgium Bart de Wever has presented the EU with a series of "logical, sensible, and warranted conditions" before he will agree to the reconstruction loan scheme, and he has left open the possibility of legal action if it "presents significant risks" for his country.

What is the EU's Proposal?

The EU is working to the wire prior to next Thursday's summit to come up with a arrangement that Belgium can agree to.

So far the EU has held off accessing the principal funds directly but starting in 2024 has paid the "extraordinary revenues" from them to Ukraine. In 2024 that amounted to €3.7bn. Legally, using the profits is seen as safe as Russia is subject to sanctions and the proceeds are not property of the Russian state.

But global military support for Ukraine has declined sharply in 2025, and Europe has had trouble trying to cover the deficit resulting from the US decision to virtually halt funding Ukraine under President Donald Trump.

There are at the moment two EU proposals designed to providing Ukraine with €90bn, to finance two-thirds of its funding needs.

• The first is to secure the capital on financial markets, backed by the EU budget as a surety. This is Belgium's preferred option but it demands a agreement by all by EU leaders and that would be difficult when Budapest and Bratislava oppose funding Ukraine's military.
• This makes the other option loaning Ukraine cash from the Moscow's immobilized capital, which were at first held in bonds but have now largely turned into cash. That money is owned by Euroclear deposited at the European Central Bank.

The European Commission accepts Belgium has justified fears and claims it is confident it has dealt with them.

The plan 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 clearing house which are in the EU.

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

In a key development, EU ambassadors are expected to agree on Friday to permanently block Russia's central bank assets held in Europe for the foreseeable future.

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

The EU ambassadors are expected 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 economic interests of the union" continues.

The Reasons Belgium is Remains Convinced

Belgium is insistent it remains a committed partner of Ukraine, but sees juridical dangers in the plan and worries about being shouldering the consequences if things go wrong.

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

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

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

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

"Lenders need to follow prudential rules and shouldn't concentrate risk. Now the EU is instructing Euroclear to do exactly that.

"What is the purpose of these bank rules? It's because we want banks to be solvent. And if things go wrong it would be up to Belgium to save Euroclear. That's an additional reason why it's so important for Belgium to obtain ironclad guarantees for Euroclear."

EU Leaders Facing Strain from All Sides

The situation is urgent, state seven EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They argue the scheme involving immobilized capital is "the most fiscally viable and politically achievable solution".

"It's a matter of destiny 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 unyielding its money should not be touched, there are added concerns among leaders in Europe that the US may want to use Russia's frozen billions differently, as part of its own peace initiative.

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

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