Moscow Retaliates at the EU's Proposal to Lend Immobilized Russian Cash to Kyiv

Kyiv remains depleting its financial resources to keep going its military and economy, after almost four years of the ongoing invasion by Moscow.

For Europe, the remedy to filling Ukraine's budget hole of €135.7bn for the coming 24 months is found in frozen Russian assets located within Belgian bank Euroclear, and Brussels aim to give it the green light at their Brussels summit next week.

Authorities in Russia warn the EU plan would be an illegal seizure, and Moscow's monetary authority declared on Friday it was initiating legal action against Euroclear in a Moscow court ahead of a definitive agreement is made.

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

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

European and Ukrainian authorities argue that that capital should be used to reconstruct what Russia has devastated: Brussels terms it a "reconstruction loan" and has devised a plan to prop up Ukraine's economy amounting to €90bn.

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

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

The legal move by Moscow was foreseen in Brussels. But it is not just Moscow that is unhappy.

Authorities in Brussels is anxious it will be left with an massive bill if it all backfires, and Euroclear head Valérie Urbain argues using the assets could "disrupt the global financial architecture".

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

Belgium's PM Bart de Wever has presented the EU with a series of "pragmatic, fair, and legitimate conditions" before he will agree to the reconstruction loan scheme, and he has refused to rule out legal action if it "poses significant risks" for his country.

Explaining the EU's Proposal?

Brussels is racing against time ahead of next Thursday's summit to come up with a solution that Belgium can agree to.

So far the EU has held off accessing the frozen capital directly but starting in 2024 has directed the "excess income" 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 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 compensate for the gap caused by the US decision to all but stop funding Ukraine under President Donald Trump.

There are at the moment two EU options designed to supplying Ukraine with €90bn, to finance a large portion of its budgetary necessities.

• The first is to raise the money on financial markets, backed by the EU budget as a guarantee. This is Belgium's preferred option but it needs a consensus by EU leaders and that would be difficult when Budapest and Bratislava object to funding Ukraine's military.
• This makes the other option lending Ukraine cash from the Moscow's immobilized capital, which were initially held in bonds but have now predominantly turned into cash. That capital is an asset of Euroclear located within the European Central Bank.

The EU's executive accepts Belgium has valid worries and states it is confident it has resolved them.

The scheme is for Belgium to be shielded with a insurance covering 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 settlement agency 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 set to approve on Friday to immobilise 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 constant risk to Belgium.

The EU ambassadors are set to use an emergency clause under Article 122 of the EU Treaties so the assets remain frozen as long as an "immediate threat to the economic interests of the union" continues.

The Reasons Belgium is Still Not Satisfied

Brussels is insistent it remains a strong supporter of Ukraine, but sees juridical dangers in the plan and worries about being left to handle the consequences if things go wrong.

A normally divided political landscape in this case has united behind Prime Minister Bart de Wever, who is under pressure from European colleagues.

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

While the EU might be able to obtain enough assurances for the loan itself, Belgium fears an additional danger of being exposed to extra legal costs.

Prof Colaert also believes the requirement for Euroclear to issue credit to the EU would contravene EU banking regulations.

"Banks need to follow capital and liquidity requirements and shouldn't put all their eggs in one basket. Now the EU is telling Euroclear to do precisely that.

"What is the purpose of these banking laws? It's because we want banks to be stable. And if things turn sour it would become the responsibility of Belgium to save Euroclear. That's an additional reason why it's so vital for Belgium to secure absolute assurances for Euroclear."

The European Union Under Pressure from Multiple Fronts

Time is of the essence, warn a group of EU member states including those closest to Russia such as the Baltics, Finland and Poland. They argue the frozen assets plan is "the financially feasible and politically achievable solution".

"It's a matter of destiny for us," states leading German conservative MP Norbert Röttgen. "If we fail, I don't know what we'll do next. That's why we have to succeed in a week's time".

While Russia is unyielding its money should not be touched, there are additional apprehensions among European figures that the US may want to use Russia's immobilized billions for another purpose, as part of its own diplomatic proposal.

Zelensky has said Ukraine is coordinating with Europe and the US on a recovery fund, but he is also mindful the US has been holding discussions with Russia about possible partnership.

An initial document 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