Moscow Hits Back at Europe's Scheme to Lend Frozen Moscow's Cash to Kyiv

Ukraine is running out of financial resources to sustain its armed forces and economy afloat, 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 rests with frozen Russian assets held by Belgian bank Euroclear, and Brussels seek to sign that off at their Brussels summit next week.

Russian officials warn the EU plan would be an illegal seizure, and Russia's central bank declared on Friday it was suing Euroclear in a Moscow court ahead of a conclusive plan is made.

'Appropriate' to Use Russia's Funds, Argue Kyiv and Brussels

Overall, Russia has about €210bn of its funds frozen in the EU, and €185bn of that is held by Euroclear.

European and Ukrainian authorities argue that money should be used to rebuild what Russia has laid waste to: Brussels terms it a "reconstruction loan" and has proposed a plan to support Ukraine's economy to the tune of €90bn.

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

Chancellor Friedrich Merz states the assets will "enable Ukraine to protect itself effectively against any future Russian attacks".

Moscow's lawsuit was anticipated in Brussels. But it is not only Moscow that is dissatisfied.

Belgium is concerned it will be left with an enormous bill if it all goes wrong, and Euroclear chief executive Valérie Urbain argues using the assets could "destabilise the world's financial order".

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

The leader of Belgium Bart de Wever has given Brussels a series of "pragmatic, fair, and legitimate conditions" before he will endorse the reparations plan, and he has not excluded legal action if it "presents significant risks" for his country.

Explaining the EU's Strategy?

The EU is under pressure prior to next Thursday's summit to finalize a arrangement that Belgium can agree to.

Until now the EU has held off using the assets themselves directly but since last year has paid the "extraordinary revenues" from them to Ukraine. In 2024 that was €3.7bn. Legally, using the interest is seen as less risky as Russia is subject to sanctions and the proceeds are not property of the Russian state.

But foreign defense assistance for Ukraine has fallen significantly in 2025, and Europe has found it difficult to compensate for the gap resulting from the US decision to all but stop funding Ukraine under President Donald Trump.

There are at the moment two EU plans designed to providing Ukraine with €90bn, to pay for a large portion of its funding needs.

• Option one is to borrow the funds on financial markets, backed by the EU budget as a collateral. This is Belgium's preferred option but it demands a unanimous vote by EU leaders and that would be problematic when Hungary and Slovakia are against funding Ukraine's military.
• This makes the other option loaning Ukraine cash from the Russian assets, which were initially held in bonds but have now predominantly been converted into cash. That funding is an asset of Euroclear deposited at the European Central Bank.

Brussels' executive arm accepts Belgium has justified fears and claims it is assured it has resolved them.

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

Should 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.

Should Russia took legal action against Belgium itself, any judgment by a Russian court would not be enforced in the EU.

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

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

The EU ambassadors are set to use an extraordinary measure under Article 122 of the EU Treaties so the assets remain frozen as long as an "immediate threat to the economic security of the union" continues.

The Reasons Belgium is Remains Convinced

Brussels is insistent it remains a committed partner of Ukraine, but sees regulatory pitfalls in the plan and fears being left to handle the fallout if things go wrong.

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

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

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

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

"Banks need to adhere to stability regulations and shouldn't make one enormous loan. Now the EU is instructing Euroclear to do just that.

"What is the purpose of these financial regulations? It's because we want banks to be secure. And if things fail it would become the responsibility of Belgium to rescue Euroclear. That's an additional reason why it's so important for Belgium to obtain water-tight guarantees for Euroclear."

Europe Facing Strain from Multiple Fronts

Time is of the essence, warn several EU member states including those bordering Russia such as the Baltics, Finland and Poland. They argue the proposal to use Russian funds is "a fiscally viable and politically realistic solution".

"It's a matter of destiny for us," states 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".

While Russia is adamant its money should not be used, there are added concerns among European figures that the US may want to employ Russia's frozen billions for another purpose, as part of its own diplomatic proposal.

Zelensky has stated Ukraine is coordinating with Europe and the US on a rebuilding fund, but he is also mindful the US has been talking to Russia about possible partnership.

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