Russia Retaliates at Europe's Proposal to Lend Immobilized Moscow's Assets to Kyiv

Kyiv remains running out of cash to keep going its military and economy afloat, after nearly four years of the ongoing invasion by Moscow.

From the EU's perspective, the answer to filling Kyiv's budget hole of €135.7bn for the following biennium rests with frozen Russian assets located within Belgian bank Euroclear, and Brussels aim to sign that off at their EU leaders' conference next week.

Authorities in Russia caution the EU plan would be an illegal seizure, and Moscow's monetary authority announced on Friday it was initiating legal action against Euroclear in a Moscow court prior to a conclusive plan is made.

'Appropriate' to Employ Moscow's Funds, Argue Kyiv and Brussels

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

European and Ukrainian authorities contend that that capital should be used to reconstruct what Russia has laid waste to: EU officials refers to it as a "reconstruction loan" and has devised a plan to bolster Ukraine's economy amounting to €90bn.

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

Chancellor Friedrich Merz argues the assets will "allow Ukraine to protect itself efficiently against any future Russian attacks".

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

The Belgian government is anxious it will be saddled with an enormous bill if it all goes wrong, and Euroclear CEO Valérie Urbain argues using the assets could "disrupt the world's financial order".

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

The leader of Belgium Bart de Wever has set the EU a series of "logical, sensible, and warranted conditions" before he will agree to the reparations plan, and he has left open the possibility of legal action if it "carries significant risks" for his country.

Explaining the EU's Plan?

The EU is under pressure prior to next Thursday's summit to agree on a compromise that Belgium can support.

Until now the EU has held off accessing 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 profits is seen as safe as Russia is under sanction and the earnings are not Russian sovereign property.

But global military support for Ukraine has declined sharply in 2025, and Europe has had trouble trying to make up the shortfall left by the US decision to all but stop funding Ukraine under President Donald Trump.

There are at the moment two EU proposals seeking to supplying Ukraine with €90bn, to pay for two-thirds of its budgetary necessities.

• The first is to secure the capital on capital markets, backed by the EU budget as a collateral. This is Belgium's first choice but it requires a consensus by EU leaders and that would be difficult when two member states oppose funding Ukraine's military.
• The alternative is providing a loan of Ukraine cash from the Russian assets, which were at first held in securities but have now predominantly matured into cash. That capital is an asset of Euroclear held in the European Central Bank.

The EU's executive recognizes Belgium has legitimate concerns and claims it is convinced it has dealt with them.

The proposal is for Belgium to be shielded with a assurance applying to 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.

If Russia took legal action against Belgium itself, any decision by a Russian court would not be accepted in the EU.

As an important step, EU ambassadors are poised to endorse on Friday to freeze indefinitely Russia's central bank assets held in Europe for the foreseeable future.

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

The EU ambassadors are set to use an extraordinary measure under Article 122 of the EU Treaties so the assets continue to be immobilized as long as an "direct danger to the economic interests of the union" continues.

The Reasons Belgium is Still Not Convinced

The Belgian government is adamant it remains a committed partner of Ukraine, but sees legal risks in the plan and fears being left to handle the fallout if things do not work out.

A usually divided political landscape in this case has united behind Prime Minister Bart de Wever, who is facing pressure from other European officials.

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

Although the EU might be able to obtain sufficient assurances for the loan itself, Belgium worries about an additional danger of being vulnerable to extra legal costs.

Prof Colaert also believes the demand for Euroclear to issue credit to the EU would violate EU banking regulations.

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

"Why do we have these financial regulations? It's because we want banks to be stable. And if things turn sour it would be up to Belgium to bail out Euroclear. That's another reason why it's so important for Belgium to obtain ironclad assurances for Euroclear."

Europe Facing Strain from All Sides

Time is of the essence, warn a group of EU member states including those closest to Russia such as the Baltics, Finland and Poland. They maintain the proposal to use Russian funds is "the most economically realistic 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 afterwards. That's why we have to finalize the deal in a week's time".

Although Russia is insistent its money should not be touched, there are further worries among leaders in Europe that the US may want to use Russia's immobilized billions in another way, as part of its own diplomatic proposal.

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

An initial document 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