Russia Retaliates at Europe's Plan to Loan Immobilized Russian Cash to Kyiv

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

For Europe, the remedy to plugging Ukraine's financial shortfall of €135.7bn for the following biennium is found in assets belonging to Russia that are frozen sitting in Belgian bank Euroclear, and Brussels hope to give it the green light at their EU leaders' conference next week.

Moscow's representatives caution the EU plan would be an act of theft, and Russia's central bank stated on Friday it was initiating legal action against Euroclear in a Moscow court ahead of a final decision is made.

'Appropriate' to Use Moscow's Funds, Assert European and Ukrainian Officials

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

The EU and Ukraine argue that those funds should be used to restore what Russia has destroyed: EU officials terms it a "reconstruction loan" and has proposed a plan to bolster Ukraine's economy valued at €90bn.

"It is appropriate that the assets frozen from Russia should be used to rebuild what Russia has devastated – and that those funds then becomes ours," states Ukraine's Volodymyr Zelensky.

German Chancellor Friedrich Merz argues the assets will "allow Ukraine to shield itself effectively against any future Russian attacks".

Moscow's lawsuit was expected in Brussels. But it is not just Moscow that is unhappy.

The Belgian government is concerned it will be left with an enormous bill if it all fails, and Euroclear head Valérie Urbain warns using the assets could "undermine the world's financial order".

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

Belgium's PM Bart de Wever has set the EU a series of "rational, reasonable, and justified conditions" before he will endorse the reparations plan, and he has not excluded legal action if it "carries significant risks" for his country.

Explaining the EU's Strategy?

Brussels is racing against time prior to next Thursday's summit to agree on a solution that Belgium can accept.

So far the EU has refrained from touching the assets themselves directly but starting in 2024 has transferred the "extraordinary revenues" from them to Ukraine. In 2024 that totaled €3.7bn. From a legal standpoint, using the profits is considered permissible as Russia is subject to sanctions and the earnings are not Russian sovereign property.

But global military support for Ukraine has slipped dramatically in 2025, and Europe has found it difficult to cover the shortfall caused by the US decision to largely cease funding Ukraine under President Donald Trump.

There are currently two EU options aimed at supplying Ukraine with €90bn, to finance a majority of its financial requirements.

• Option one is to borrow the funds on the markets, backed by the EU budget as a surety. This is Belgium's preferred option but it needs a agreement by all by EU leaders and that would be challenging when Hungary and Slovakia object to funding Ukraine's military.
• That leaves loaning Ukraine cash from the Russian assets, which were initially held in bonds but have now predominantly matured into cash. That capital is owned by Euroclear held in the European Central Bank.

The EU's executive acknowledges Belgium has justified fears and claims it is convinced it has dealt with them.

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

If Euroclear face a financial hit of its own assets in Russia, the loss would be compensated from assets belonging to Russia's own clearing house which are in the EU.

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

In a significant move, EU ambassadors are poised to endorse on Friday to immobilise Russia's central bank assets held in Europe permanently.

Heretofore they have had to vote by consensus every six months to continue the freeze, which could have meant a constant risk to Belgium.

The EU ambassadors are planning 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 security of the union" continues.

The Reasons Belgium is Remains On Board

Brussels is firm it remains a strong supporter of Ukraine, but perceives juridical dangers in the plan and fears being shouldering the repercussions if things go wrong.

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

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

Although the EU might be able to secure adequate protections for the loan itself, Belgium is concerned about an added risk of being exposed to extra legal costs.

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

"Lenders need to follow prudential rules and shouldn't put all their eggs in one basket. Now the EU is instructing Euroclear to do precisely that.

"What is the purpose of these financial regulations? It's because we want banks to be solvent. And if things go wrong it would become the responsibility of Belgium to rescue Euroclear. That's a further cause why it's so crucial for Belgium to get ironclad protections for Euroclear."

Europe Under Pressure from Multiple Fronts

The situation is urgent, warn seven EU member states including those closest to Russia such as the Baltics, Finland and Poland. They argue the scheme involving immobilized capital is "the financially feasible and politically realistic solution".

"It is a decisive moment 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 finalize the deal in a week's time".

While Russia is unyielding its money should not be accessed, there are added concerns among leaders in Europe that the US may want to use Russia's immobilized billions for another purpose, as part of its own peace initiative.

Zelensky has indicated Ukraine is working with Europe and the US on a rebuilding 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 mentioned $100bn of Russia's frozen assets being used by the US for reconstruction, with the US {taking|receiving