Russia Responds at the EU's Scheme to Lend Frozen Moscow's Funds to Ukraine

Ukraine is running out of funding to maintain its armed forces and economy afloat, after almost four years of the ongoing invasion by Moscow.

For Europe, the solution to plugging Kyiv's funding gap of €135.7bn for the following biennium rests with assets belonging to Russia that are frozen sitting in Belgian bank Euroclear, and European Union officials seek to give it the green light at their meeting in Brussels next week.

Authorities in Russia warn the EU plan would be an illegal seizure, and Moscow's monetary authority announced on Friday it was taking to court Euroclear in a Moscow court even before a conclusive plan is made.

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

In total, Russia has roughly €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 reconstruct what Russia has destroyed: The European Commission calls it a "loan for reparations" and has proposed a plan to prop up Ukraine's economy to the tune of €90bn.

"It is appropriate that Moscow's blocked funds should be used to reconstruct what Russia has devastated – and that money then becomes Ukraine's," says Ukraine's Volodymyr Zelensky.

Germany's leader Friedrich Merz says the assets will "allow Ukraine to shield itself successfully against subsequent Russian attacks".

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

Authorities in Brussels is worried it will be left with an huge bill if it all backfires, and Euroclear CEO Valérie Urbain argues using the assets could "disrupt the global financial architecture".

Euroclear also has an estimated €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 endorse the reconstruction loan scheme, and he has not excluded legal action if it "carries significant risks" for his country.

What is the EU's Plan?

The EU is working to the wire prior to next Thursday's summit to finalize a arrangement that Belgium can support.

Previously the EU has avoided touching the frozen capital directly but since last year has directed the "extraordinary revenues" from them to Ukraine. In 2024 that totaled €3.7bn. Juridically, using the revenue is considered safe as Russia is subject to sanctions and the earnings are not property of the Russian state.

But international military aid for Ukraine has declined sharply in 2025, and Europe has had trouble trying to cover the deficit resulting from the US decision to all but stop funding Ukraine under President Donald Trump.

There are at the moment two EU plans aimed at supplying Ukraine with €90bn, to pay for a large portion of its financial requirements.

• One is to secure the capital on the markets, secured against the EU budget as a guarantee. This is Belgium's first choice but it demands a agreement by all by EU leaders and that would be challenging when Budapest and Bratislava object to funding Ukraine's military.
• The alternative is lending Ukraine cash from the Moscow's immobilized capital, which were initially held in financial instruments but have now mostly been converted into cash. That capital is owned by Euroclear deposited at the European Central Bank.

The European Commission accepts Belgium has valid worries and states it is assured it has resolved them.

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

If Euroclear incur losses 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 decision by a Russian court would not be recognized in the EU.

In a key development, EU ambassadors are set to approve on Friday to immobilise Russia's central bank assets held in Europe for the foreseeable future.

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 set to use an emergency clause under Article 122 of the EU Treaties so the assets continue to be immobilized as long as an "clear risk 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 perceives juridical dangers in the plan and fears being forced to deal with the consequences if things do not work out.

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

"Belgium has a modest-sized economy. Belgian GDP is approximately €565bn – imagine if it would need to shoulder a €185bn bill," says Veerle Colaert, professor of financial law at KU Leuven University.

Although the EU might be able to arrange adequate guarantees for the loan itself, Belgium worries about an additional danger of being exposed to extra damages or penalties.

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

"Lenders need to adhere to stability regulations and shouldn't put all their eggs in one basket. Now the EU is telling Euroclear to do just that.

"Why do we have these bank rules? It's because we want banks to be secure. And if things fail it would be up to Belgium to bail out Euroclear. That's another reason why it's so vital for Belgium to get absolute protections for Euroclear."

Europe Under Pressure from All Sides

Time is of the essence, caution seven EU member states including those closest to Russia such as the Baltics, Finland and Poland. They maintain the frozen assets plan is "the most fiscally viable and politically realistic solution".

"It is a decisive moment for us," warns 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".

While Russia is unyielding its money should not be used, there are additional apprehensions among EU officials that the US may want to use Russia's immobilized billions in another way, as part of its own diplomatic proposal.

Zelensky has indicated Ukraine is coordinating with Europe and the US on a reconstruction fund, but he is also cognizant the US has been holding discussions with Russia about potential collaboration.

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