Russia Retaliates at Europe's Plan to Lend Immobilized Russian Funds to Kyiv

Ukraine is facing a severe shortage of cash to sustain its military and economy, after almost four years of full-scale conflict with Russia.

For Europe, the solution to addressing Kyiv's financial shortfall of €135.7bn for the next two years rests with Moscow's immobilized funds held by Belgian bank Euroclear, and European Union officials seek to give it the green light at their EU leaders' conference next week.

Russian officials caution the EU plan would be an act of theft, and Moscow's monetary authority stated on Friday it was taking to court Euroclear in a Moscow court even before a definitive agreement is made.

'Appropriate' to Utilize Russia's Funds, Argue Ukraine and the EU

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

The EU and Ukraine contend that that capital should be used to restore what Russia has laid waste to: The European Commission calls it a "reparations loan" and has proposed a plan to bolster Ukraine's economy to the tune of €90bn.

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

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

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

Authorities in Brussels is worried it will be left with an massive bill if it all goes wrong, and Euroclear CEO Valérie Urbain warns using the assets could "undermine the international financial system".

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

Belgium's PM Bart de Wever has presented the EU with a series of "rational, reasonable, and justified conditions" before he will endorse the reparations plan, and he has not excluded legal action if it "carries significant risks" for his country.

Explaining the EU's Strategy?

European Union officials is working to the wire ahead of next Thursday's summit to agree on a solution that Belgium can support.

Until now the EU has refrained from using the assets themselves directly but for the past year has paid the "excess income" from them to Ukraine. In 2024 that amounted to €3.7bn. From a legal standpoint, using the revenue is deemed permissible as Russia is sanctioned and the earnings are not Moscow's sovereign assets.

But foreign defense assistance for Ukraine has fallen significantly in 2025, and Europe has had trouble trying to make up the deficit caused by the US decision to largely cease funding Ukraine under President Donald Trump.

There are presently two EU proposals aimed at providing Ukraine with €90bn, to pay for two-thirds of its budgetary necessities.

• One is to raise the money on financial markets, backed by the EU budget as a collateral. This is Belgium's favored solution but it needs a consensus by EU leaders and that would be problematic when Budapest and Bratislava object to funding Ukraine's military.
• This makes the other option loaning Ukraine cash from the Moscow's immobilized capital, which were initially held in securities but have now predominantly matured into cash. That capital is Euroclear property held in the European Central Bank.

The European Commission acknowledges Belgium has justified fears and states it is confident it has resolved them.

The proposal is for Belgium to be protected with a insurance covering all the €210bn of Russian assets in the EU.

If 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.

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 expected to agree on Friday to permanently block Russia's central bank assets held in Europe for the foreseeable future.

Until now they have had to vote all together every six months to continue the freeze, which could have meant a constant 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 "clear risk to the financial well-being of the union" continues.

Why Belgium is Still Not On Board

Belgium is adamant it remains a staunch ally of Ukraine, but perceives legal risks in the plan and worries about being shouldering the fallout if things fail.

A normally divided political landscape in this case has rallied behind Prime Minister Bart de Wever, who is being pressured from other European officials.

"Belgium has a modest-sized economy. Belgian GDP is about €565bn – imagine if it would need to carry a €185bn bill," comments Veerle Colaert, professor of financial law at KU Leuven University.

Although the EU might be able to obtain enough guarantees for the loan itself, Belgium is concerned about an further exposure of being vulnerable to extra damages or penalties.

Prof Colaert also argues the requirement for Euroclear to provide a loan to the EU would breach EU banking regulations.

"Financial institutions need to follow capital and liquidity requirements and shouldn't concentrate risk. Now the EU is instructing Euroclear to do exactly that.

"Why do we have these bank rules? It's because we want banks to be secure. And if things fail it would be up to Belgium to rescue Euroclear. That's an additional reason why it's so important for Belgium to obtain absolute protections for Euroclear."

Europe Under Pressure from Multiple Fronts

There is no time to lose, state several EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They maintain the scheme involving immobilized capital is "the financially feasible and practically possible solution".

"It's a matter of destiny for us," warns leading German conservative MP Norbert Röttgen. "If we fail, I don't know what we'll do afterwards. That's why we have to succeed in a week's time".

While Russia is unyielding its money should not be touched, there are further worries among EU officials that the US may want to use Russia's frozen billions differently, as part of its own peace plan.

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

An initial document of the US peace plan referred to $100bn of Russia's frozen assets being used by the US for reconstruction, with the US {taking|receiving