Russia Hits Back at Europe's Proposal to Lend Frozen Russian Assets to Kyiv

Kyiv remains depleting its cash to maintain its military and economy afloat, after almost four years of full-scale conflict with Russia.

From the EU's perspective, the answer to plugging Kyiv's budget hole of €135.7bn for the following biennium is found 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.

Russian officials state the EU plan would be an act of theft, and Moscow's monetary authority declared on Friday it was initiating legal action against Euroclear in a Moscow court even before a definitive agreement is made.

'Only Fair' to Employ Moscow's Funds, Assert European and Ukrainian Officials

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

Brussels and Kyiv maintain that money should be used to rebuild what Russia has laid waste to: Brussels calls it a "reparations loan" and has devised a plan to bolster Ukraine's economy to the tune of €90bn.

"It is only just that Russia's frozen assets should be used to reconstruct what Russia has destroyed – and that money then becomes Ukraine's," states Ukrainian President Volodymyr Zelensky.

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

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

Belgium is concerned it will be burdened by an huge bill if it all backfires, and Euroclear CEO Valérie Urbain argues using the assets could "undermine the world's financial order".

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

Belgian Prime Minister 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 left open the possibility of legal action if it "carries significant risks" for his country.

The Details of the EU's Strategy?

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

Until now the EU has avoided touching the frozen capital directly but since last year has transferred the "excess income" from them to Ukraine. In 2024 that was €3.7bn. Juridically, using the revenue is seen as permissible as Russia is subject to sanctions and the returns are not property of the Russian state.

But international military aid for Ukraine has slipped dramatically in 2025, and Europe has found it difficult to cover the shortfall resulting from the US decision to largely cease funding Ukraine under President Donald Trump.

There are presently two EU options aimed at providing Ukraine with €90bn, to finance two-thirds of its funding needs.

• One is to secure the capital on capital markets, backed by the EU budget as a surety. This is Belgium's favored solution but it requires a consensus by EU leaders and that would be challenging when two member states are against funding Ukraine's military.
• That leaves loaning Ukraine cash from the Russian assets, which were at first held in bonds but have now predominantly turned into cash. That funding is Euroclear property deposited at the European Central Bank.

The EU's executive acknowledges Belgium has legitimate concerns and says it is assured it has dealt with them.

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

If Euroclear incur losses of its own assets in Russia, the loss would be compensated from assets belonging to Russia's own clearing house which are in the EU.

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

As an important step, EU ambassadors are expected to agree on Friday to immobilise Russia's central bank assets held in Europe indefinitely.

Until now they have had to vote by consensus every six months to renew the freeze, which could have meant a repeated risk to Belgium.

The EU ambassadors are expected to use an special provision under Article 122 of the EU Treaties so the assets continue to be immobilized as long as an "clear risk to the economic interests of the union" continues.

Why Belgium is Remains On Board

The Belgian government is adamant it remains a staunch ally of Ukraine, but identifies juridical dangers in the plan and fears being left to handle the repercussions if things go wrong.

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

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

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

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

"Lenders need to follow prudential rules and shouldn't concentrate risk. Now the EU is asking Euroclear to do just that.

"Why do we have these financial regulations? It's because we want banks to be secure. And if things go wrong it would be up to Belgium to bail out Euroclear. That's a further cause why it's so important for Belgium to secure absolute guarantees for Euroclear."

EU Leaders Under Pressure from Multiple Fronts

Time is of the essence, warn seven EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They believe the scheme involving immobilized capital is "the most financially feasible and politically achievable solution".

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

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

Zelensky has stated Ukraine is in discussions with Europe and the US on a reconstruction fund, but he is also cognizant the US has been engaging with Russia about future co-operation.

An early draft of the US peace plan referred to $100bn of Russia's immobilized capital being used by the US for reconstruction, with the US {taking|receiving