Russia Responds at Europe's Proposal to Loan Frozen Moscow's Funds to Kyiv

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

For Europe, the answer to filling Kyiv's financial shortfall of €135.7bn for the following biennium is found in Moscow's immobilized funds sitting in Belgian bank Euroclear, and European Union officials aim to finalize the plan at their meeting in Brussels next week.

Authorities in Russia caution the EU plan would be an confiscation, and the Central Bank of Russia declared on Friday it was suing Euroclear in a Moscow court even before a definitive agreement is made.

'Appropriate' to Employ Moscow's Assets, Say European and Ukrainian Officials

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

The EU and Ukraine argue that those funds should be used to rebuild what Russia has laid waste to: EU officials calls it a "loan for reparations" and has devised a plan to support Ukraine's economy valued at €90bn.

"It is only just that the assets frozen from Russia should be used to rebuild what Russia has devastated – and that that capital then becomes Ukraine's," states Ukrainian President Volodymyr Zelensky.

Chancellor Friedrich Merz says the assets will "allow Ukraine to defend itself effectively against any future Russian attacks".

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

The Belgian government is worried it will be left with an huge bill if it all fails, and Euroclear head Valérie Urbain says using the assets could "destabilise the global financial architecture".

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

Belgian Prime Minister Bart de Wever has set the EU a series of "logical, sensible, and warranted conditions" before he will accept the reparations plan, and he has refused to rule out legal action if it "carries significant risks" for his country.

The Details of the EU's Proposal?

The EU is racing against time before next Thursday's summit to finalize a arrangement that Belgium can support.

Previously the EU has avoided touching the principal funds directly but for the past year has paid the "excess income" from them to Ukraine. In 2024 that totaled €3.7bn. Juridically, using the profits is deemed safe as Russia is sanctioned and the proceeds are not Russian sovereign property.

But global military support for Ukraine has declined sharply in 2025, and Europe has found it difficult to compensate for the shortfall left by the US decision to virtually halt funding Ukraine under President Donald Trump.

There are at the moment two EU plans aimed at furnishing Ukraine with €90bn, to finance a large portion of its budgetary necessities.

• Option one is to secure the capital on financial markets, backed by the EU budget as a guarantee. This is Belgium's favored solution but it needs a unanimous vote by EU leaders and that would be difficult when two member states are against funding Ukraine's military.
• That leaves providing a loan of Ukraine cash from the frozen Russian funds, which were initially held in financial instruments but have now mostly matured into cash. That funding is an asset of Euroclear held in the European Central Bank.

The EU's executive acknowledges Belgium has justified fears and says it is assured it has resolved them.

The scheme is for Belgium to be safeguarded with a assurance covering all the €210bn of Russian assets in the EU.

Should Euroclear face a financial hit of its own assets in Russia, that would be offset from assets belonging to Russia's own clearing house which are in the EU.

If 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 poised to endorse on Friday to freeze indefinitely Russia's central bank assets held in Europe permanently.

Previously they have had to vote unanimously every six months to continue the freeze, which could have meant a ongoing risk to Belgium.

The EU ambassadors are expected to use an special provision under Article 122 of the EU Treaties so the assets remain frozen as long as an "direct danger to the financial well-being of the union" continues.

The Reasons Belgium is Remains Satisfied

Brussels is insistent it remains a staunch ally of Ukraine, but perceives legal risks in the plan and fears being left to handle the repercussions if things do not work out.

A usually fractured political scene in this case has rallied 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 – consider if it would need to shoulder a €185bn bill," says Veerle Colaert, expert in financial law at KU Leuven University.

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

Prof Colaert also contends the demand for Euroclear to grant a loan to the EU would violate EU banking regulations.

"Banks need to follow stability regulations and shouldn't put all their eggs in one basket. Now the EU is telling Euroclear to do exactly that.

"What is the purpose of these bank rules? It's because we want banks to be solvent. And if things go wrong it would fall to Belgium to bail out Euroclear. That's an additional reason why it's so crucial for Belgium to secure absolute assurances for Euroclear."

Europe In a Difficult Position from Every Direction

Time is of the essence, warn seven EU member states including those bordering Russia such as the Baltics, Finland and Poland. They maintain the frozen assets plan is "the most fiscally viable and practically possible solution".

"It's a matter of destiny for us," states leading German conservative MP Norbert Röttgen. "If the plan collapses, I don't know what we'll do next. That's why we have to finalize the deal 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 deploy Russia's frozen billions differently, as part of its own diplomatic proposal.

Zelensky has said Ukraine is coordinating with Europe and the US on a reconstruction fund, but he is also mindful the US has been talking to Russia about potential collaboration.

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