Russia Retaliates at Europe's Proposal to Loan Frozen Moscow's Assets to Ukraine

Kyiv remains running out of funding to keep going its military and economy afloat, after nearly four years of the ongoing invasion by Moscow.

From the EU's perspective, the solution to filling Kyiv's budget hole of €135.7bn for the coming 24 months lies in frozen Russian assets sitting in Belgian bank Euroclear, and Brussels hope to finalize the plan at their EU leaders' conference next week.

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

'Appropriate' to Use Moscow's Assets, Assert Kyiv and Brussels

Overall, Russia has roughly €210bn of its assets blocked in the EU, and €185bn of that is managed by Euroclear.

Brussels and Kyiv argue that money should be used to reconstruct what Russia has devastated: Brussels calls it a "reconstruction loan" and has devised a plan to bolster Ukraine's economy to the tune of €90bn.

"It is appropriate that Russia's frozen assets should be used to reconstruct what Russia has destroyed – and that those funds then becomes Ukraine's," remarks Ukrainian President Volodymyr Zelensky.

Chancellor Friedrich Merz says the assets will "help Ukraine to shield itself efficiently against subsequent Russian attacks".

Russia's court action was foreseen in Brussels. But it is not only Moscow that is concerned.

The Belgian government is anxious it will be burdened by an enormous bill if it all goes wrong, and Euroclear chief executive Valérie Urbain says using the assets could "undermine the world's financial order".

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

Belgian Prime Minister Bart de Wever has presented the EU with a series of "pragmatic, fair, and legitimate conditions" before he will accept 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?

The EU is under pressure before next Thursday's summit to agree on a solution that Belgium can agree to.

Previously the EU has held off touching the assets themselves directly but for the past year has directed the "windfall profits" from them to Ukraine. In 2024 that amounted to €3.7bn. From a legal standpoint, using the profits is considered safe as Russia is subject to sanctions and the earnings are not Russian sovereign property.

But international military aid for Ukraine has slipped dramatically in 2025, and Europe has had trouble trying to cover the gap caused by the US decision to largely cease funding Ukraine under President Donald Trump.

There are presently two EU plans seeking to furnishing Ukraine with €90bn, to pay for a large portion of its budgetary necessities.

• Option one is to borrow the funds on financial markets, backed by the EU budget as a surety. This is Belgium's preferred option but it requires a unanimous vote by EU leaders and that would be challenging when Budapest and Bratislava object to funding Ukraine's military.
• This makes the other option loaning Ukraine cash from the Moscow's immobilized capital, which were originally held in financial instruments but have now largely turned into cash. That funding is owned by Euroclear held in the European Central Bank.

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

The scheme is for Belgium to be protected with a insurance 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 settlement agency which are in the EU.

Should Russia took legal action against Belgium itself, any decision by a Russian court would not be enforced in the EU.

As an important step, EU ambassadors are poised to endorse on Friday to permanently block Russia's central bank assets held in Europe for the foreseeable future.

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

The EU ambassadors are set to use an extraordinary measure under Article 122 of the EU Treaties so the assets remain frozen as long as an "direct danger to the financial well-being of the union" continues.

The Reasons Belgium is Remains Satisfied

Belgium is adamant it remains a strong supporter of Ukraine, but perceives regulatory pitfalls in the plan and is concerned about being forced to deal with the fallout if things do not work out.

A usually fractured political scene in this case has rallied behind Prime Minister Bart de Wever, who is under pressure from other European officials.

"Belgium is a small economy. Belgian GDP is about €565bn – imagine if it would need to carry a €185bn bill," notes Veerle Colaert, academic specializing in financial regulation at KU Leuven University.

While the EU might be able to obtain sufficient protections for the loan itself, Belgium is concerned about an additional danger of being subject to extra legal costs.

Prof Colaert also believes the requirement for Euroclear to provide a loan to the EU would breach EU banking regulations.

"Financial institutions need to comply with stability regulations and shouldn't concentrate risk. Now the EU is asking Euroclear to do exactly that.

"Why do we have these bank rules? It's because we want banks to be secure. And if things fail it would be up to Belgium to save Euroclear. That's an additional reason why it's so crucial for Belgium to get absolute assurances for Euroclear."

EU Leaders Facing Strain from Multiple Fronts

The situation is urgent, warn several EU member states including those closest to Russia such as the Baltics, Finland and Poland. They maintain the frozen assets plan is "a financially feasible and practically possible solution".

"It's a matter of destiny for us," warns 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 finalize the deal in a week's time".

Although Russia is adamant its money should not be accessed, there are further worries among leaders in Europe that the US may want to use Russia's immobilized billions in another way, as part of its own peace initiative.

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

An initial document of the US peace plan suggested $100bn of Russia's blocked funds being used by the US for reconstruction, with the US {taking|receiving