Russia Hits Back at the EU's Scheme to Lend Immobilized Russian Cash to Kyiv

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

For Europe, the answer 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 aim to sign that off at their meeting in Brussels next week.

Authorities in Russia caution the EU plan would be an illegal seizure, and the Central Bank of Russia stated on Friday it was initiating legal action against Euroclear in a Moscow court ahead of a definitive agreement is made.

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

Overall, Russia has roughly €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 reconstruct what Russia has destroyed: EU officials terms it a "loan for reparations" and has proposed a plan to prop up Ukraine's economy valued at €90bn.

"It is appropriate that the assets frozen from Russia should be used to reconstruct what Russia has devastated – and that those funds then becomes ours," remarks Ukrainian President Volodymyr Zelensky.

Germany's leader Friedrich Merz says the assets will "enable Ukraine to defend itself efficiently against future Russian attacks".

Moscow's lawsuit was anticipated in Brussels. But it is not just Moscow that is concerned.

Authorities in Brussels is anxious it will be saddled with an huge bill if it all goes wrong, and Euroclear chief executive Valérie Urbain warns using the assets could "disrupt the global financial architecture".

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

The leader of Belgium Bart de Wever has set the EU a series of "rational, reasonable, and justified conditions" before he will agree to the reparations plan, and he has not excluded legal action if it "poses significant risks" for his country.

Explaining the EU's Strategy?

The EU is under pressure ahead of next Thursday's summit to finalize a compromise that Belgium can agree to.

Previously the EU has held off accessing the principal funds directly but for the past year has directed the "extraordinary revenues" from them to Ukraine. In 2024 that totaled €3.7bn. Juridically, using the interest is considered permissible as Russia is sanctioned and the earnings are not Moscow's sovereign assets.

But foreign defense assistance for Ukraine has fallen significantly in 2025, and Europe has found it difficult to make up the gap left by the US decision to largely cease funding Ukraine under President Donald Trump.

There are presently two EU plans seeking to furnishing Ukraine with €90bn, to cover two-thirds of its funding needs.

• The first is to secure the capital on financial markets, secured against the EU budget as a guarantee. This is Belgium's first choice but it demands a consensus by EU leaders and that would be difficult when two member states are against funding Ukraine's military.
• This makes the other option lending Ukraine cash from the Moscow's immobilized capital, which were at first held in securities but have now largely been converted into cash. That capital is an asset of Euroclear held in the European Central Bank.

The EU's executive recognizes Belgium has justified fears and says it is assured it has dealt with them.

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

Should Euroclear face a financial hit 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 went after Belgium itself, any decision by a Russian court would not be recognized 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 indefinitely.

Heretofore they have had to vote unanimously 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 remain frozen as long as an "clear risk to the economic interests of the union" continues.

Why Belgium is Still Not Satisfied

The Belgian government is insistent it remains a strong supporter of Ukraine, but perceives juridical dangers in the plan and worries about being left to handle the consequences if things go wrong.

A typically divided political landscape in this case has come together in support of Prime Minister Bart de Wever, who is facing pressure from European colleagues.

"Belgium has a modest-sized economy. Belgian GDP is approximately €565bn – think about if it would need to carry a €185bn bill," notes Veerle Colaert, expert in financial law at KU Leuven University.

While the EU might be able to secure enough guarantees for the loan itself, Belgium fears an further exposure of being vulnerable to extra damages or penalties.

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

"Banks need to adhere to capital and liquidity requirements and shouldn't put all their eggs in one basket. Now the EU is instructing Euroclear to do just that.

"What is the purpose of these banking laws? It's because we want banks to be solvent. And if things go wrong it would be up to Belgium to bail out Euroclear. That's another reason why it's so vital for Belgium to obtain water-tight protections for Euroclear."

EU Leaders Facing Strain from Every Direction

The situation is urgent, state seven EU member states including those closest to Russia such as the Baltics, Finland and Poland. They maintain the proposal to use Russian funds is "a financially feasible and politically achievable solution".

"It's a matter of destiny for us," says leading German conservative MP Norbert Röttgen. "If we fail, I don't know what we'll do next. That's why we have to reach an agreement in a week's time".

Although Russia is unyielding its money should not be accessed, 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 indicated Ukraine is working with Europe and the US on a rebuilding fund, but he is also cognizant the US has been talking to Russia about possible partnership.

An initial document of the US peace plan referred to $100bn of Russia's blocked funds being used by the US for reconstruction, with the US {taking|receiving