Moscow Hits Back at the EU's Proposal to Lend Frozen Moscow's Cash to Kyiv

Kyiv remains facing a severe shortage of cash to maintain its armed forces and economy, after close to 48 months of the ongoing invasion by Moscow.

From the EU's perspective, the remedy to filling Kyiv's funding gap of €135.7bn for the following biennium is found in assets belonging to Russia that are frozen held by Belgian bank Euroclear, and European Union officials seek to give it the green light at their Brussels summit next week.

Russian officials state the EU plan would be an act of theft, and Russia's central bank declared on Friday it was initiating legal action against Euroclear in a Moscow court prior to a final decision is made.

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

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

The EU and Ukraine maintain that those funds should be used to rebuild what Russia has devastated: The European Commission refers to it as a "loan for reparations" and has come up with a plan to support Ukraine's economy amounting to €90bn.

"It is only just that Moscow's blocked funds should be used to rebuild what Russia has destroyed – and that money then becomes ours," remarks Ukrainian President Volodymyr Zelensky.

Germany's leader Friedrich Merz says the assets will "help Ukraine to shield itself successfully against subsequent Russian attacks".

Moscow's lawsuit was foreseen in Brussels. But it is not only Moscow that is unhappy.

The Belgian government is worried it will be saddled with an huge bill if it all goes wrong, and Euroclear head Valérie Urbain argues using the assets could "destabilise the world's financial order".

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

Belgian Prime Minister Bart de Wever has set the EU a series of "pragmatic, fair, and legitimate conditions" before he will accept the reparations plan, and he has left open the possibility of legal action if it "presents significant risks" for his country.

The Details of the EU's Strategy?

European Union officials is under pressure before next Thursday's summit to come up with a solution that Belgium can agree to.

Previously the EU has avoided touching the principal funds directly but starting in 2024 has directed the "windfall profits" from them to Ukraine. In 2024 that totaled €3.7bn. From a legal standpoint, using the revenue is considered less risky as Russia is subject to sanctions and the proceeds are not Russian sovereign property.

But international military aid for Ukraine has fallen significantly in 2025, and Europe has struggled to compensate for the gap caused by the US decision to all but stop funding Ukraine under President Donald Trump.

There are currently two EU plans aimed at providing Ukraine with €90bn, to finance a large portion of its funding needs.

• The first is to secure the capital on capital markets, backed by the EU budget as a guarantee. This is Belgium's first choice but it needs a consensus by EU leaders and that would be problematic when two member states are against funding Ukraine's military.
• That leaves loaning Ukraine cash from the Moscow's immobilized capital, which were originally held in securities but have now largely been converted into cash. That capital is an asset of Euroclear located within the European Central Bank.

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

The scheme is for Belgium to be shielded with a insurance encompassing 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.

If Russia went after Belgium itself, any judgment by a Russian court would not be accepted in the EU.

In a key development, EU ambassadors are set to approve on Friday to immobilise Russia's central bank assets held in Europe for the foreseeable future.

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

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

The Reasons Belgium is Not Yet Convinced

Belgium is adamant it remains a staunch ally of Ukraine, but perceives regulatory pitfalls in the plan and fears being shouldering the repercussions if things go wrong.

A normally fractured political scene in this case has rallied behind Prime Minister Bart de Wever, who is being pressured from European colleagues.

"Belgium is a small economy. Belgian GDP is approximately €565bn – think about if it would need to bear a €185bn bill," notes Veerle Colaert, professor of financial law at KU Leuven University.

Although the EU might be able to obtain 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 demand for Euroclear to issue credit to the EU would contravene EU banking regulations.

"Banks need to adhere to stability regulations and shouldn't concentrate risk. Now the EU is instructing Euroclear to do precisely that.

"What is the purpose of these banking laws? It's because we want banks to be solvent. And if things fail it would fall to Belgium to rescue Euroclear. That's a further cause why it's so important for Belgium to obtain ironclad protections for Euroclear."

The European Union Under Pressure from Every Direction

Time is of the essence, state several EU member states including those closest to Russia such as the Baltics, Finland and Poland. They believe the scheme involving immobilized capital is "a economically realistic and politically realistic solution".

"It's a matter of destiny for us," warns leading German conservative MP Norbert Röttgen. "If we fail, 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 adamant its money should not be used, there are added concerns among EU officials that the US may want to deploy Russia's frozen billions in another way, as part of its own peace plan.

Zelensky has said Ukraine is in discussions 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 early draft of the US peace plan referred to $100bn of Russia's frozen assets being used by the US for reconstruction, with the US {taking|receiving