Moscow Retaliates at Europe's Scheme to Lend Frozen Moscow's Cash to Ukraine

Kyiv remains running out of funding to maintain its military and economy afloat, after almost four years of Russia's full-scale war.

From the EU's perspective, the remedy to plugging Ukraine's financial shortfall of €135.7bn for the coming 24 months rests with assets belonging to Russia that are frozen located within Belgian bank Euroclear, and European Union officials hope to finalize the plan at their EU leaders' conference next week.

Russian officials state the EU plan would be an act of theft, and Russia's central bank stated on Friday it was suing Euroclear in a Moscow court ahead of a final decision is made.

'Only Fair' to Use Russia's Funds, Assert European and Ukrainian Officials

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

The EU and Ukraine maintain that those funds should be used to reconstruct what Russia has destroyed: EU officials calls it a "loan for reparations" and has come up with a plan to prop up Ukraine's economy amounting to €90bn.

"It's only fair that Russia's frozen assets should be used to reconstruct what Russia has devastated – and that money then becomes ours," remarks Ukraine's Volodymyr Zelensky.

German Chancellor Friedrich Merz states the assets will "help Ukraine to shield itself efficiently against future Russian attacks".

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

The Belgian government is anxious it will be saddled with an enormous bill if it all backfires, and Euroclear head Valérie Urbain argues using the assets could "undermine the world's financial order".

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

The leader of Belgium Bart de Wever has given Brussels a series of "rational, reasonable, and justified conditions" before he will accept the reparations plan, and he has not excluded legal action if it "poses significant risks" for his country.

What is the EU's Strategy?

The EU is under pressure prior to next Thursday's summit to agree on a compromise that Belgium can support.

So far the EU has avoided touching the frozen capital directly but since last year has directed the "extraordinary revenues" from them to Ukraine. In 2024 that totaled €3.7bn. Juridically, using the revenue is considered permissible as Russia is subject to sanctions and the earnings are not Moscow's sovereign assets.

But global military support for Ukraine has slipped dramatically in 2025, and Europe has had trouble trying to make up the shortfall caused by the US decision to virtually halt funding Ukraine under President Donald Trump.

There are at the moment two EU options aimed at providing Ukraine with €90bn, to finance a large portion of its financial requirements.

• Option one is to raise the money on capital markets, secured against the EU budget as a collateral. This is Belgium's first choice but it requires a consensus by EU leaders and that would be challenging when Budapest and Bratislava oppose funding Ukraine's military.
• This makes the other option providing a loan of Ukraine cash from the frozen Russian funds, which were at first held in securities but have now mostly matured into cash. That capital is an asset of Euroclear deposited at the European Central Bank.

The European Commission recognizes Belgium has justified fears and says it is convinced it has addressed them.

The plan is for Belgium to be shielded with a assurance 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 targeted Belgium itself, any ruling 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 indefinitely.

Until now they have had to vote unanimously every six months to renew 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 "clear risk to the economic interests of the union" continues.

The Reasons Belgium is Not Yet Convinced

The Belgian government is adamant it remains a strong supporter of Ukraine, but perceives regulatory pitfalls in the plan and fears being left to handle 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 fellow EU leaders.

"The Belgian economy is not large. Belgian GDP is approximately €565bn – think about if it would need to carry a €185bn bill," notes Veerle Colaert, professor of financial law at KU Leuven University.

Although the EU might be able to secure sufficient guarantees for the loan itself, Belgium fears an further exposure of being subject to extra fines or liabilities.

Prof Colaert also believes the demand for Euroclear to issue credit to the EU would violate EU banking regulations.

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

"Why do we have these banking laws? It's because we want banks to be secure. And if things turn sour it would be up to Belgium to bail out Euroclear. That's another reason why it's so important for Belgium to get absolute protections for Euroclear."

Europe Under Pressure from Multiple Fronts

The situation is urgent, warn a group of EU member states including those closest to Russia such as the Baltics, Finland and Poland. They argue the scheme involving immobilized capital is "the most financially feasible and politically realistic solution".

"It's a matter of destiny for us," says leading German conservative MP Norbert Röttgen. "If the plan collapses, I don't know what we'll do subsequently. That's why we have to reach an agreement in a week's time".

While Russia is unyielding its money should not be touched, there are additional apprehensions among EU officials that the US may want to employ Russia's blocked funds 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 cognizant the US has been talking to Russia about potential collaboration.

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