Moscow Responds at the EU's Scheme to Loan Frozen Russian Assets to Ukraine

Ukraine is facing a severe shortage of financial resources to maintain its military and economy, after nearly four years of full-scale conflict with Russia.

From the EU's perspective, the answer to addressing Ukraine's budget hole of €135.7bn for the coming 24 months lies in assets belonging to Russia that are frozen sitting in Belgian bank Euroclear, and EU leaders hope to give it the green light at their EU leaders' conference next week.

Moscow's representatives caution the EU plan would be an act of theft, and Moscow's monetary authority declared on Friday it was initiating legal action against Euroclear in a Moscow court ahead of a final decision is made.

'Appropriate' to Utilize Moscow's Funds, Assert Kyiv and Brussels

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

Brussels and Kyiv contend that that capital should be used to restore what Russia has devastated: EU officials terms it a "reconstruction loan" and has come up with a plan to support Ukraine's economy amounting to €90bn.

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

German Chancellor Friedrich Merz says the assets will "help Ukraine to protect itself effectively against any future Russian attacks".

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

The Belgian government is anxious it will be left with an massive bill if it all backfires, and Euroclear CEO Valérie Urbain warns using the assets could "destabilise the international financial system".

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

Belgian Prime Minister Bart de Wever has set the EU a series of "rational, reasonable, and justified conditions" before he will agree to the reparations plan, and he has refused to rule out legal action if it "carries significant risks" for his country.

Explaining the EU's Proposal?

European Union officials is under pressure prior to next Thursday's summit to agree on a compromise that Belgium can accept.

Previously the EU has refrained from touching the frozen capital directly but starting in 2024 has transferred the "extraordinary revenues" from them to Ukraine. In 2024 that totaled €3.7bn. From a legal standpoint, using the revenue is deemed safe as Russia is under sanction and the returns are not property of the Russian state.

But foreign defense assistance for Ukraine has slipped dramatically in 2025, and Europe has struggled to cover the deficit caused by the US decision to all but stop funding Ukraine under President Donald Trump.

There are presently two EU options designed to supplying Ukraine with €90bn, to pay for a majority of its funding needs.

• Option one is to borrow the funds on capital markets, guaranteed by the EU budget as a collateral. This is Belgium's first choice but it requires a unanimous vote by EU leaders and that would be problematic when Hungary and Slovakia oppose funding Ukraine's military.
• The alternative is lending Ukraine cash from the Russian assets, which were initially held in financial instruments but have now largely matured into cash. That money is owned by Euroclear deposited at the European Central Bank.

The EU's executive accepts Belgium has legitimate concerns and says it is convinced it has resolved them.

The proposal is for Belgium to be shielded with a assurance encompassing all the €210bn of Russian assets in the EU.

If Euroclear suffer a loss of its own assets in Russia, the loss would be compensated from assets belonging to Russia's own settlement agency which are in the EU.

If Russia took legal action against Belgium itself, any judgment by a Russian court would not be accepted in the EU.

In a key development, EU ambassadors are expected to agree 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 set to use an emergency clause under Article 122 of the EU Treaties so the assets continue to be immobilized as long as an "direct danger to the economic security of the union" continues.

Why Belgium is Not Yet Satisfied

Brussels is firm it remains a staunch ally of Ukraine, but perceives legal risks in the plan and worries about being shouldering the repercussions if things fail.

A usually divided political landscape in this case has rallied behind Prime Minister Bart de Wever, who is being pressured from other European officials.

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

While the EU might be able to arrange sufficient guarantees for the loan itself, Belgium is concerned about an further exposure of being exposed to extra fines or liabilities.

Prof Colaert also contends the stipulation for Euroclear to issue credit to the EU would violate EU banking regulations.

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

"Why do we have 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 an additional reason why it's so important for Belgium to get absolute protections for Euroclear."

Europe Under Pressure from Every Direction

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 "the most economically realistic and politically realistic solution".

"It's a matter of destiny for us," states leading German conservative MP Norbert Röttgen. "Should we not succeed, I don't know what we'll do afterwards. That's why we have to reach an agreement in a week's time".

While Russia is unyielding its money should not be used, there are additional apprehensions among leaders in Europe that the US may want to use Russia's blocked funds for another purpose, as part of its own peace initiative.

Zelensky has stated Ukraine is working with Europe and the US on a recovery fund, but he is also mindful the US has been talking to Russia about future co-operation.

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