Moscow Responds at the EU's Proposal to Loan Frozen Russian Funds to Ukraine

Ukraine is running out of funding to maintain its armed forces and economy afloat, after close to 48 months of full-scale conflict with Russia.

In the view of European leaders, the answer to filling Kyiv's funding gap 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 sign that off at their Brussels summit next week.

Authorities in Russia caution the EU plan would be an act of theft, and Moscow's monetary authority declared on Friday it was taking to court Euroclear in a Moscow court ahead of a conclusive plan is made.

'Appropriate' to Utilize Moscow's Assets, Assert Kyiv and Brussels

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

Brussels and Kyiv maintain that those funds should be used to restore what Russia has laid waste to: The European Commission calls it a "reconstruction loan" and has proposed a plan to prop up Ukraine's economy amounting to €90bn.

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

Germany's leader Friedrich Merz argues the assets will "allow Ukraine to defend itself efficiently against subsequent Russian attacks".

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

Belgium is worried it will be left with an enormous bill if it all fails, and Euroclear CEO Valérie Urbain says using the assets could "undermine the world's financial order".

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

Belgian Prime Minister Bart de Wever has presented the EU with a series of "pragmatic, fair, and legitimate conditions" before he will agree to the reconstruction loan scheme, and he has refused to rule out legal action if it "presents significant risks" for his country.

What is the EU's Plan?

Brussels is under pressure before next Thursday's summit to come up with a compromise that Belgium can agree to.

Until now the EU has refrained from using the frozen capital directly but for the past year has paid the "excess income" from them to Ukraine. In 2024 that amounted to €3.7bn. From a legal standpoint, using the profits is deemed less risky as Russia is under sanction and the returns are not Russian sovereign property.

But international military aid for Ukraine has slipped dramatically in 2025, and Europe has found it difficult to compensate for the gap left by the US decision to all but stop funding Ukraine under President Donald Trump.

There are currently two EU proposals seeking to supplying Ukraine with €90bn, to pay for a large portion of its financial requirements.

• One is to secure the capital on financial markets, secured against the EU budget as a collateral. This is Belgium's favored solution but it needs a unanimous vote by EU leaders and that would be challenging when Budapest and Bratislava object to funding Ukraine's military.
• The alternative is loaning Ukraine cash from the Moscow's immobilized capital, which were originally held in securities but have now predominantly turned into cash. That funding is Euroclear property deposited at the European Central Bank.

Brussels' executive arm acknowledges Belgium has legitimate concerns and claims it is convinced it has resolved them.

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

Should Euroclear suffer a loss 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.

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

In a key development, EU ambassadors are poised to endorse on Friday to permanently block Russia's central bank assets held in Europe indefinitely.

Until now they have had to vote unanimously every six months to renew the freeze, which could have meant a constant 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 "clear risk to the financial well-being of the union" continues.

Why Belgium is Remains Satisfied

Belgium is firm it remains a staunch ally of Ukraine, but perceives regulatory pitfalls in the plan and fears being forced to deal with the repercussions if things fail.

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

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

While the EU might be able to secure adequate protections for the loan itself, Belgium worries about an added risk of being subject to extra legal costs.

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

"Banks need to follow capital and liquidity requirements and shouldn't concentrate risk. Now the EU is telling Euroclear to do precisely 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 bail out Euroclear. That's an additional reason why it's so vital for Belgium to obtain water-tight protections for Euroclear."

The European Union Under Pressure from Every Direction

Time is of the essence, warn seven EU member states including those closest to Russia such as the Baltics, Finland and Poland. They believe the scheme involving immobilized capital is "a financially feasible and practically possible solution".

"It is a decisive moment 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 reach an agreement in a week's time".

While Russia is insistent its money should not be used, there are additional apprehensions among leaders in Europe that the US may want to use Russia's blocked funds in another way, as part of its own peace initiative.

Zelensky has stated Ukraine is in discussions with Europe and the US on a recovery fund, but he is also cognizant the US has been talking to Russia about possible partnership.

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