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

Kyiv remains depleting its financial resources to keep going its military and economy, after close to 48 months of Russia's full-scale war.

In the view of European leaders, the remedy to addressing Ukraine's budget hole of €135.7bn for the coming 24 months lies in frozen Russian assets held by Belgian bank Euroclear, and European Union officials aim to finalize the plan at their EU leaders' conference next week.

Moscow's representatives state the EU plan would be an confiscation, and the Central Bank of Russia announced on Friday it was initiating legal action against Euroclear in a Moscow court ahead of a definitive agreement is made.

'Just' to Employ Moscow's Funds, Assert European and Ukrainian Officials

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

The EU and Ukraine argue that that capital should be used to restore 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 reconstruct what Russia has destroyed – and that that capital then becomes Ukraine's," states Ukraine's Volodymyr Zelensky.

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

Moscow's lawsuit was anticipated in Brussels. But it is not just Moscow that is concerned.

Belgium is anxious it will be left with an enormous bill if it all goes wrong, and Euroclear chief executive Valérie Urbain argues using the assets could "undermine the international financial system".

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

Belgium's PM Bart de Wever has presented the EU with a series of "logical, sensible, and warranted 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.

What is the EU's Plan?

European Union officials is under pressure ahead of next Thursday's summit to finalize a arrangement that Belgium can support.

Until now the EU has refrained from touching the principal funds directly but since last year has transferred the "extraordinary revenues" from them to Ukraine. In 2024 that was €3.7bn. Legally, using the revenue is deemed safe as Russia is sanctioned and the proceeds are not property of the Russian state.

But international military aid for Ukraine has declined sharply in 2025, and Europe has found it difficult to cover the gap resulting from the US decision to largely cease funding Ukraine under President Donald Trump.

There are currently two EU options aimed at supplying Ukraine with €90bn, to cover a large portion of its budgetary necessities.

• The first is to borrow the funds on capital markets, guaranteed by the EU budget as a guarantee. This is Belgium's preferred option but it requires a agreement by all by EU leaders and that would be difficult when Budapest and Bratislava are against funding Ukraine's military.
• The alternative is providing a loan of Ukraine cash from the Russian assets, which were originally held in securities but have now mostly turned into cash. That money is owned by Euroclear held in the European Central Bank.

The European Commission recognizes Belgium has valid worries and says it is confident it has resolved them.

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

If Euroclear face a financial hit of its own assets in Russia, the shortfall would be covered from assets belonging to Russia's own clearing house which are in the EU.

In the event that Russia took legal action against Belgium itself, any decision by a Russian court would not be recognized in the EU.

As an important step, EU ambassadors are expected to agree on Friday to immobilise 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 planning to use an extraordinary measure under Article 122 of the EU Treaties so the assets stay blocked as long as an "direct danger to the economic interests of the union" continues.

Why Belgium is Still Not On Board

Brussels is firm it remains a committed partner of Ukraine, but identifies legal risks in the plan and is concerned about being forced to deal with the fallout if things fail.

A typically fractured political scene 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 approximately €565bn – consider if it would need to carry a €185bn bill," comments Veerle Colaert, academic specializing in financial regulation at KU Leuven University.

While the EU might be able to arrange enough guarantees for the loan itself, Belgium fears an additional danger of being vulnerable to extra damages or penalties.

Prof Colaert also argues the requirement for Euroclear to issue credit to the EU would violate EU banking regulations.

"Lenders need to follow prudential rules and shouldn't concentrate risk. Now the EU is asking Euroclear to do just that.

"What is the purpose of these banking laws? It's because we want banks to be stable. And if things fail it would be up to Belgium to bail out Euroclear. That's an additional reason why it's so vital for Belgium to secure absolute guarantees for Euroclear."

Europe In a Difficult Position from All Sides

There is no time to lose, state a group of EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They maintain the scheme involving immobilized capital is "the most fiscally viable and politically achievable solution".

"This is a crucial test for us," states leading German conservative MP Norbert Röttgen. "Should we not succeed, I don't know what we'll do next. That's why we have to reach an agreement in a week's time".

While Russia is insistent its money should not be touched, there are additional apprehensions among European figures that the US may want to deploy Russia's frozen billions differently, as part of its own peace initiative.

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

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