Russia Hits Back at the EU's Proposal to Lend Immobilized Russian Cash to Ukraine

Kyiv remains facing a severe shortage of funding to maintain its military and economy afloat, after nearly four years of the ongoing invasion by Moscow.

From the EU's perspective, the solution to filling Kyiv's financial shortfall of €135.7bn for the next two years lies in Moscow's immobilized funds located within Belgian bank Euroclear, and European Union officials seek to finalize the plan at their EU leaders' conference next week.

Authorities in Russia state the EU plan would be an confiscation, and Russia's central bank announced on Friday it was initiating legal action against Euroclear in a Moscow court ahead of a final decision is made.

'Just' to Utilize Russia's Assets, Assert Ukraine and the EU

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

Brussels and Kyiv argue that those funds should be used to reconstruct what Russia has devastated: Brussels refers to it as a "reconstruction loan" and has come up with a plan to prop up Ukraine's economy amounting to €90bn.

"It's only fair that Moscow's blocked funds should be used to rebuild what Russia has devastated – and that those funds then becomes Ukraine's," remarks Ukrainian President Volodymyr Zelensky.

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

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

The Belgian government is concerned it will be burdened by an enormous bill if it all fails, and Euroclear head Valérie Urbain says using the assets could "destabilise the world's financial order".

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

Belgium's PM Bart de Wever has presented the EU with a series of "pragmatic, fair, and legitimate conditions" before he will agree to the reconstruction loan scheme, and he has not excluded legal action if it "poses significant risks" for his country.

The Details of the EU's Proposal?

The EU is under pressure ahead of next Thursday's summit to agree on a arrangement that Belgium can accept.

Previously the EU has avoided touching the principal funds directly but starting in 2024 has directed the "excess income" from them to Ukraine. In 2024 that amounted to €3.7bn. From a legal standpoint, using the revenue is considered permissible as Russia is subject to sanctions and the returns are not Moscow's sovereign assets.

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

There are presently two EU plans designed to providing Ukraine with €90bn, to pay for a majority of its funding needs.

• Option one is to raise the money on capital markets, guaranteed by the EU budget as a guarantee. This is Belgium's first choice but it requires a unanimous vote by EU leaders and that would be problematic when Hungary and Slovakia object to funding Ukraine's military.
• That leaves loaning Ukraine cash from the Russian assets, which were originally held in financial instruments but have now largely been converted into cash. That capital is owned by Euroclear 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 proposal is for Belgium to be safeguarded with a guarantee encompassing all the €210bn of Russian assets in the EU.

Should 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.

Should Russia targeted Belgium itself, any ruling by a Russian court would not be enforced in the EU.

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

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

The EU ambassadors are set to use an emergency clause under Article 122 of the EU Treaties so the assets continue to be immobilized as long as an "immediate threat to the economic interests of the union" continues.

The Reasons Belgium is Still Not On Board

Belgium is firm it remains a committed partner of Ukraine, but identifies legal risks in the plan and worries about being shouldering the consequences if things go wrong.

A usually partisan political environment in this case has united behind Prime Minister Bart de Wever, who is being pressured from other European officials.

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

While the EU might be able to arrange adequate guarantees for the loan itself, Belgium is concerned about an added risk of being vulnerable to extra legal costs.

Prof Colaert also contends the requirement 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 financial regulations? It's because we want banks to be solvent. And if things go wrong it would become the responsibility of Belgium to save Euroclear. That's an additional reason why it's so vital for Belgium to obtain water-tight protections for Euroclear."

Europe Facing Strain from All Sides

There is no time to lose, caution several EU member states including those bordering Russia such as the Baltics, Finland and Poland. They argue the proposal to use Russian funds is "the most economically realistic and practically possible solution".

"It is a decisive moment for us," states leading German conservative MP Norbert Röttgen. "If the plan collapses, I don't know what we'll do afterwards. That's why we have to finalize the deal in a week's time".

While Russia is adamant its money should not be used, there are further worries among European figures that the US may want to employ Russia's immobilized billions in another way, as part of its own diplomatic proposal.

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

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