Russia Retaliates at the EU's Plan to Loan Frozen Russian Cash to Kyiv

Kyiv remains facing a severe shortage of financial resources to maintain its armed forces and economy, after almost four years of full-scale conflict with Russia.

In the view of European leaders, the remedy to addressing Ukraine's financial shortfall of €135.7bn for the following biennium lies in assets belonging to Russia that are frozen held by Belgian bank Euroclear, and European Union officials hope to give it the green light at their Brussels summit next week.

Authorities in Russia caution the EU plan would be an illegal seizure, and Russia's central bank stated on Friday it was initiating legal action against Euroclear in a Moscow court prior to a final decision is made.

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

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

Brussels and Kyiv maintain that money should be used to restore what Russia has laid waste to: The European Commission refers to it as a "reparations loan" and has proposed a plan to support Ukraine's economy valued at €90bn.

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

Germany's leader Friedrich Merz says the assets will "help Ukraine to protect itself successfully against any future Russian attacks".

Russia's court action was anticipated in Brussels. But it is not only Moscow that is concerned.

Authorities in Brussels is concerned it will be burdened by an massive bill if it all backfires, and Euroclear head Valérie Urbain says using the assets could "undermine the global financial architecture".

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

Belgian Prime Minister Bart de Wever has given Brussels a series of "pragmatic, fair, and legitimate conditions" before he will endorse the reconstruction loan scheme, and he has not excluded legal action if it "presents significant risks" for his country.

What is the EU's Proposal?

European Union officials is working to the wire before next Thursday's summit to come up with a compromise that Belgium can agree to.

So far the EU has held off using the assets themselves directly but for the past year has transferred the "excess income" from them to Ukraine. In 2024 that totaled €3.7bn. Legally, using the interest is deemed safe as Russia is under sanction and the earnings are not Moscow's sovereign assets.

But global military support for Ukraine has slipped dramatically in 2025, and Europe has had trouble trying to cover the gap caused by the US decision to all but stop funding Ukraine under President Donald Trump.

There are currently two EU plans seeking to supplying Ukraine with €90bn, to finance a large portion of its funding needs.

• Option one is to borrow the funds on financial markets, guaranteed by the EU budget as a collateral. This is Belgium's favored solution but it needs a agreement by all by EU leaders and that would be challenging when Budapest and Bratislava oppose funding Ukraine's military.
• That leaves providing a loan of Ukraine cash from the Russian assets, which were at first held in financial instruments but have now largely been converted into cash. That capital is an asset of Euroclear held in the European Central Bank.

Brussels' executive arm acknowledges Belgium has legitimate concerns and says it is assured it has addressed them.

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

Should 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.

If Russia targeted Belgium itself, any judgment by a Russian court would not be enforced 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 by consensus every six months to renew the freeze, which could have meant a repeated risk to Belgium.

The EU ambassadors are planning 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 economic interests of the union" continues.

Why Belgium is Remains Satisfied

The Belgian government is adamant it remains a strong supporter of Ukraine, but perceives legal risks in the plan and is concerned about being left to handle the repercussions if things fail.

A normally fractured political scene in this case has come together in support of Prime Minister Bart de Wever, who is under pressure from European colleagues.

"Belgium is a small economy. Belgian GDP is about €565bn – think about if it would need to bear a €185bn bill," comments Veerle Colaert, professor of financial law at KU Leuven University.

While the EU might be able to arrange sufficient protections for the loan itself, Belgium worries about an further exposure of being exposed to extra damages or penalties.

Prof Colaert also argues the stipulation for Euroclear to issue credit to the EU would breach EU banking regulations.

"Banks need to comply with capital and liquidity requirements and shouldn't put all their eggs in one basket. 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 stable. And if things fail it would fall to Belgium to bail out Euroclear. That's another reason why it's so crucial for Belgium to secure ironclad guarantees for Euroclear."

The European Union In a Difficult Position from All Sides

There is no time to lose, caution seven EU member states including those bordering Russia such as the Baltics, Finland and Poland. They believe the scheme involving immobilized capital is "the most financially feasible and politically realistic solution".

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

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

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 possible partnership.

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