Russia Hits Back at the EU's Plan to Loan Frozen Russian Assets to Kyiv

Ukraine is facing a severe shortage of funding to keep going its armed forces and economy afloat, after close to 48 months of the ongoing invasion by Moscow.

For Europe, the solution to addressing Ukraine's funding gap of €135.7bn for the next two years rests with assets belonging to Russia that are frozen located within Belgian bank Euroclear, and Brussels aim to give it the green light at their Brussels summit next week.

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

'Just' to Use Russia's Funds, Say Ukraine and the EU

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

European and Ukrainian authorities maintain that those funds should be used to rebuild what Russia has devastated: EU officials refers to it as a "loan for reparations" and has devised a plan to prop up Ukraine's economy valued at €90bn.

"It's only fair that the assets frozen from Russia should be used to reconstruct what Russia has destroyed – and that those funds then becomes Ukraine's," states Ukraine's Volodymyr Zelensky.

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

The legal move by Moscow was foreseen in Brussels. But it is not only Moscow that is unhappy.

Authorities in Brussels is anxious it will be left with an huge bill if it all backfires, and Euroclear chief executive Valérie Urbain says using the assets could "disrupt the world's financial order".

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

Belgium's PM Bart de Wever has presented the EU with a series of "pragmatic, fair, and legitimate 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 Proposal?

The EU is racing against time before next Thursday's summit to agree on a compromise that Belgium can agree to.

Previously the EU has refrained from accessing the principal funds directly but for the past year has transferred the "windfall profits" from them to Ukraine. In 2024 that was €3.7bn. From a legal standpoint, using the interest is seen as safe as Russia is sanctioned and the earnings are not property of the Russian state.

But global military support for Ukraine has slipped dramatically in 2025, and Europe has had trouble trying to compensate for the deficit resulting from the US decision to all but stop funding Ukraine under President Donald Trump.

There are at the moment two EU plans designed to furnishing Ukraine with €90bn, to cover a majority of its financial requirements.

• Option one is to borrow the funds on financial markets, guaranteed by the EU budget as a guarantee. This is Belgium's favored solution but it needs a agreement by all by EU leaders and that would be problematic when two member states are against funding Ukraine's military.
• That leaves providing a loan of 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 European Commission acknowledges Belgium has valid worries and states it is confident it has dealt with them.

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

If Euroclear suffer a loss of its own assets in Russia, that would be offset from assets belonging to Russia's own settlement agency which are in the EU.

In the event that Russia went after Belgium itself, any decision by a Russian court would not be recognized in the EU.

In a significant move, EU ambassadors are set to approve on Friday to immobilise Russia's central bank assets held in Europe permanently.

Heretofore they have had to vote all together every six months to extend the freeze, which could have meant a ongoing risk to Belgium.

The EU ambassadors are expected to use an emergency clause under Article 122 of the EU Treaties so the assets remain frozen as long as an "immediate threat to the economic security of the union" continues.

The Reasons Belgium is Still Not Satisfied

Brussels is firm it remains a staunch ally of Ukraine, but sees juridical dangers 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 united behind Prime Minister Bart de Wever, who is under pressure from other European officials.

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

Although the EU might be able to secure adequate guarantees for the loan itself, Belgium is concerned about an additional danger of being vulnerable to extra legal costs.

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

"Financial institutions need to follow prudential rules and shouldn't make one enormous loan. Now the EU is telling Euroclear to do just that.

"Why do we have these bank rules? It's because we want banks to be secure. And if things go wrong it would be up to Belgium to save Euroclear. That's another reason why it's so important for Belgium to secure water-tight protections for Euroclear."

EU Leaders Under Pressure from Multiple Fronts

The situation is urgent, warn seven EU member states including those closest to Russia such as the Baltics, Finland and Poland. They maintain the scheme involving immobilized capital is "the economically realistic and politically achievable solution".

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

Although Russia is adamant its money should not be touched, there are added concerns among European figures that the US may want to use Russia's blocked funds in another way, as part of its own peace plan.

Zelensky has stated Ukraine is working with Europe and the US on a recovery fund, but he is also cognizant the US has been holding discussions with Russia about potential collaboration.

An early draft of the US peace plan suggested $100bn of Russia's frozen assets being used by the US for reconstruction, with the US {taking|receiving