Russia Retaliates at the EU's Scheme to Lend Immobilized Russian Cash to Kyiv

Kyiv remains depleting its funding to sustain its armed forces and economy, after almost four years of full-scale conflict with Russia.

From the EU's perspective, the remedy to addressing Ukraine's funding gap of €135.7bn for the following biennium lies in Moscow's immobilized funds held by Belgian bank Euroclear, and Brussels aim to give it the green light at their EU leaders' conference next week.

Authorities in Russia caution the EU plan would be an illegal seizure, and the Central Bank of Russia declared on Friday it was suing Euroclear in a Moscow court ahead of a final decision is made.

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

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

The EU and Ukraine contend that those funds should be used to restore what Russia has laid waste to: Brussels refers to it as a "reparations loan" and has devised a plan to bolster Ukraine's economy to the tune of €90bn.

"It is only just that Moscow's blocked funds should be used to rebuild what Russia has destroyed – and that that capital then becomes ours," states Ukraine's Volodymyr Zelensky.

German Chancellor Friedrich Merz says the assets will "allow Ukraine to defend itself efficiently against subsequent Russian attacks".

The legal move by Moscow was anticipated in Brussels. But it is not just Moscow that is dissatisfied.

Authorities in Brussels is concerned it will be left with an massive bill if it all goes wrong, and Euroclear chief executive Valérie Urbain argues using the assets could "destabilise the world's financial order".

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

Belgium's PM Bart de Wever has given Brussels 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.

What is the EU's Strategy?

The EU is working to the wire before next Thursday's summit to come up with a solution that Belgium can agree to.

Previously the EU has refrained from touching the assets themselves directly but for the past year has directed the "extraordinary revenues" from them to Ukraine. In 2024 that was €3.7bn. Legally, using the profits is deemed permissible as Russia is under sanction and the returns are not Moscow's sovereign assets.

But foreign defense assistance for Ukraine has declined sharply in 2025, and Europe has found it difficult to make up the shortfall caused by the US decision to all but stop funding Ukraine under President Donald Trump.

There are presently two EU proposals seeking to providing Ukraine with €90bn, to pay for a large portion of its funding needs.

• Option one is to secure the capital on financial markets, backed by the EU budget as a guarantee. This is Belgium's preferred option but it demands a consensus by EU leaders and that would be difficult when two member states are against funding Ukraine's military.
• This makes the other option loaning Ukraine cash from the Russian assets, which were initially held in financial instruments but have now predominantly turned into cash. That money is an asset of Euroclear located within the European Central Bank.

The EU's executive acknowledges Belgium has valid worries and says it is assured it has addressed them.

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

If Russia targeted Belgium itself, any decision by a Russian court would not be recognized in the EU.

As an important step, EU ambassadors are set to approve on Friday to permanently block Russia's central bank assets held in Europe permanently.

Previously they have had to vote all together every six months to continue the freeze, which could have meant a ongoing 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 "immediate threat to the economic security of the union" continues.

Why Belgium is Remains On Board

The Belgian government is firm it remains a committed partner of Ukraine, but identifies legal risks in the plan and worries about being forced to deal with the fallout if things go wrong.

A typically divided political landscape in this case has come together in support of Prime Minister Bart de Wever, who is being pressured from European colleagues.

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

While the EU might be able to obtain sufficient assurances for the loan itself, Belgium worries about an additional danger of being vulnerable to extra damages or penalties.

Prof Colaert also contends the requirement for Euroclear to issue credit to the EU would breach EU banking regulations.

"Banks need to comply with prudential rules and shouldn't make one enormous loan. Now the EU is instructing Euroclear to do precisely that.

"Why do we have these bank rules? It's because we want banks to be stable. And if things fail it would fall to Belgium to save Euroclear. That's an additional reason why it's so important for Belgium to obtain water-tight guarantees for Euroclear."

EU Leaders Facing Strain from Every Direction

Time is of the essence, warn several EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They believe the frozen assets plan is "a fiscally viable and politically realistic solution".

"This is a crucial test 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 succeed in a week's time".

Although Russia is unyielding its money should not be touched, there are additional apprehensions among European figures that the US may want to use Russia's frozen billions for another purpose, as part of its own peace plan.

Zelensky has said Ukraine is coordinating with Europe and the US on a recovery fund, but he is also cognizant the US has been talking to Russia about possible partnership.

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