Russia Retaliates at Europe's Scheme to Loan Immobilized Russian Funds to Kyiv

Kyiv remains facing a severe shortage of cash to maintain its military and economy afloat, after nearly four years of full-scale conflict with Russia.

In the view of European leaders, the remedy to addressing Ukraine's funding gap of €135.7bn for the following biennium is found in Moscow's immobilized funds located within Belgian bank Euroclear, and EU leaders aim to sign that off at their EU leaders' conference next week.

Moscow's representatives warn the EU plan would be an confiscation, and Russia's central bank announced on Friday it was taking to court Euroclear in a Moscow court even before a final decision is made.

'Just' to Use Russia's Funds, Say Kyiv and Brussels

In total, Russia has approximately €210bn of its funds frozen in the EU, and €185bn of that is held by Euroclear.

The EU and Ukraine maintain that money should be used to rebuild what Russia has destroyed: EU officials terms it a "loan for reparations" and has proposed a plan to prop up Ukraine's economy amounting to €90bn.

"It is only just that Russia's frozen assets should be used to rebuild what Russia has devastated – and that those funds then becomes ours," says Ukrainian President Volodymyr Zelensky.

German Chancellor Friedrich Merz argues the assets will "allow Ukraine to protect itself efficiently against future Russian attacks".

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

The Belgian government is anxious it will be burdened by an enormous bill if it all backfires, and Euroclear chief executive Valérie Urbain says using the assets could "destabilise the international financial system".

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

Belgian Prime Minister Bart de Wever has set the EU a series of "rational, reasonable, and justified conditions" before he will endorse the reparations plan, and he has not excluded 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 finalize a arrangement that Belgium can support.

So far the EU has refrained from touching the principal funds directly but since last year has paid the "excess income" from them to Ukraine. In 2024 that was €3.7bn. Juridically, using the profits is seen as permissible as Russia is under sanction and the earnings are not Russian sovereign property.

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

There are currently two EU plans seeking to supplying Ukraine with €90bn, to pay for two-thirds of its financial requirements.

• One is to raise the money on the markets, backed by the EU budget as a surety. This is Belgium's favored solution but it needs a consensus by EU leaders and that would be challenging when Budapest and Bratislava oppose funding Ukraine's military.
• That leaves providing a loan of Ukraine cash from the frozen Russian funds, which were initially held in securities but have now predominantly matured into cash. That money is Euroclear property deposited at the European Central Bank.

The EU's executive recognizes Belgium has justified fears and claims it is confident it has resolved them.

The scheme is for Belgium to be shielded with a guarantee covering all the €210bn of Russian assets in the EU.

Should Euroclear incur losses 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 judgment by a Russian court would not be accepted in the EU.

In a key development, EU ambassadors are poised to endorse on Friday to permanently block Russia's central bank assets held in Europe permanently.

Previously 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 expected 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 financial well-being of the union" continues.

The Reasons Belgium is Remains On Board

Brussels is firm it remains a committed partner of Ukraine, but sees regulatory pitfalls in the plan and worries about being forced to deal with the repercussions if things fail.

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

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

Although the EU might be able to secure sufficient assurances for the loan itself, Belgium is concerned about an further exposure of being vulnerable to extra legal costs.

Prof Colaert also believes the stipulation for Euroclear to issue credit to the EU would contravene EU banking regulations.

"Lenders need to follow stability regulations and shouldn't make one enormous loan. Now the EU is asking Euroclear to do precisely that.

"Why do we have these banking laws? It's because we want banks to be solvent. And if things fail it would become the responsibility of Belgium to rescue Euroclear. That's an additional reason why it's so vital for Belgium to obtain water-tight protections for Euroclear."

Europe In a Difficult Position from Every Direction

The situation is urgent, warn several EU member states including those closest to Russia such as the Baltics, Finland and Poland. They argue the proposal to use Russian funds is "a financially feasible and politically realistic solution".

"It's a matter of destiny for us," states leading German conservative MP Norbert Röttgen. "If the plan collapses, 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 adamant its money should not be touched, there are additional apprehensions among EU officials that the US may want to employ Russia's frozen billions differently, as part of its own diplomatic proposal.

Zelensky has said Ukraine is working with Europe and the US on a recovery fund, but he is also aware the US has been holding discussions with Russia about future co-operation.

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