Russia Retaliates at the EU's Plan to Lend Immobilized Russian Funds to Ukraine

Ukraine is running out of cash to maintain its armed forces and economy, after close to 48 months of Russia's full-scale war.

From the EU's perspective, the remedy to addressing Ukraine's budget hole of €135.7bn for the following biennium rests with assets belonging to Russia that are frozen located within Belgian bank Euroclear, and European Union officials seek to give it the green light at their Brussels summit next week.

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

'Just' to Use Moscow's Funds, Assert Kyiv and Brussels

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

The EU and Ukraine contend that money should be used to reconstruct what Russia has destroyed: Brussels refers to it as a "reparations 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 reconstruct what Russia has destroyed – and that that capital then becomes Ukraine's," states Ukraine's Volodymyr Zelensky.

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

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

Belgium is anxious it will be burdened by an huge bill if it all goes wrong, and Euroclear chief executive Valérie Urbain argues using the assets could "disrupt the international financial system".

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

Belgian Prime Minister Bart de Wever has presented the EU with 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 "poses significant risks" for his country.

What is the EU's Plan?

The EU is working to the wire ahead of next Thursday's summit to finalize a arrangement that Belgium can agree to.

Previously the EU has avoided using the assets themselves directly but starting in 2024 has paid the "extraordinary revenues" from them to Ukraine. In 2024 that totaled €3.7bn. Juridically, using the profits is considered safe as Russia is sanctioned and the earnings are not Moscow's sovereign assets.

But international military aid for Ukraine has slipped dramatically in 2025, and Europe has struggled to compensate for the gap resulting from the US decision to virtually halt funding Ukraine under President Donald Trump.

There are at the moment two EU proposals seeking to supplying Ukraine with €90bn, to finance a majority of its funding needs.

• The first is to secure the capital on the markets, secured against the EU budget as a collateral. This is Belgium's first choice but it demands a unanimous vote by EU leaders and that would be challenging when two member states are against funding Ukraine's military.
• That leaves loaning Ukraine cash from the Russian assets, which were at first held in bonds but have now mostly matured into cash. That capital is an asset of Euroclear deposited at the European Central Bank.

The European Commission recognizes Belgium has justified fears and claims it is confident it has addressed them.

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

If 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.

Should Russia targeted Belgium itself, any judgment by a Russian court would not be recognized in the EU.

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

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

The EU ambassadors are expected to use an extraordinary measure under Article 122 of the EU Treaties so the assets stay blocked as long as an "clear risk to the financial well-being of the union" continues.

The Reasons Belgium is Remains On Board

Belgium is firm it remains a committed partner of Ukraine, but perceives legal risks in the plan and worries about being shouldering the consequences if things do not work out.

A normally fractured political scene in this case has united behind Prime Minister Bart de Wever, who is under pressure from fellow EU leaders.

"Belgium is a small economy. Belgian GDP is around €565bn – imagine if it would need to carry a €185bn bill," says Veerle Colaert, expert in financial law at KU Leuven University.

While the EU might be able to arrange sufficient assurances for the loan itself, Belgium is concerned about an additional danger of being subject to extra damages or penalties.

Prof Colaert also believes the requirement for Euroclear to grant a loan to the EU would contravene EU banking regulations.

"Lenders need to follow capital and liquidity requirements and shouldn't make one enormous loan. Now the EU is instructing Euroclear to do exactly that.

"Why do we have these bank rules? It's because we want banks to be solvent. And if things turn sour it would fall to Belgium to save Euroclear. That's another reason why it's so important for Belgium to obtain absolute assurances for Euroclear."

Europe In a Difficult Position from Every Direction

The situation is urgent, state several 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 financially feasible and practically possible solution".

"It is a decisive moment for us," says leading German conservative MP Norbert Röttgen. "If the plan collapses, 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 touched, there are additional apprehensions among European figures that the US may want to deploy Russia's frozen billions in another way, as part of its own peace plan.

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

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