Russia Retaliates at the EU's Scheme to Loan Frozen Russian Funds to Ukraine

Kyiv remains facing a severe shortage of funding to keep going its military and economy, after close to 48 months of full-scale conflict with Russia.

In the view of European leaders, the answer to plugging Ukraine's financial shortfall of €135.7bn for the following biennium lies in frozen Russian assets sitting in Belgian bank Euroclear, and European Union officials seek to give it the green light at their EU leaders' conference next week.

Moscow's representatives caution the EU plan would be an illegal seizure, and Russia's central bank stated on Friday it was suing Euroclear in a Moscow court even before a definitive agreement is made.

'Appropriate' to Employ Moscow's Funds, Say Ukraine and the EU

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

Brussels and Kyiv argue that that capital should be used to rebuild what Russia has laid waste to: EU officials calls it a "loan for reparations" and has come up with a plan to support Ukraine's economy amounting to €90bn.

"It is appropriate that Russia's frozen assets should be used to rebuild what Russia has destroyed – and that money then becomes Ukraine's," remarks Ukraine's Volodymyr Zelensky.

German Chancellor Friedrich Merz says the assets will "enable Ukraine to protect itself effectively against subsequent Russian attacks".

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

Authorities in Brussels is concerned it will be burdened by an massive bill if it all goes wrong, and Euroclear CEO Valérie Urbain says using the assets could "disrupt the international financial system".

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

The leader of Belgium Bart de Wever has set the EU a series of "logical, sensible, and warranted conditions" before he will accept the reparations plan, and he has not excluded legal action if it "carries significant risks" for his country.

Explaining the EU's Plan?

The EU is racing against time ahead of next Thursday's summit to finalize a arrangement that Belgium can accept.

Until now the EU has held off using the principal funds directly but since last year has directed the "extraordinary revenues" from them to Ukraine. In 2024 that was €3.7bn. From a legal standpoint, using the profits is seen as safe as Russia is subject to sanctions and the proceeds are not Russian sovereign property.

But global military support for Ukraine has fallen significantly in 2025, and Europe has struggled to make up the shortfall left by the US decision to all but stop funding Ukraine under President Donald Trump.

There are currently two EU options aimed at supplying Ukraine with €90bn, to pay for two-thirds of its budgetary necessities.

• Option one is to raise the money on the markets, guaranteed by the EU budget as a collateral. This is Belgium's favored solution but it requires a agreement by all by EU leaders and that would be challenging when two member states oppose funding Ukraine's military.
• That leaves providing a loan of Ukraine cash from the frozen Russian funds, which were originally held in securities but have now largely turned into cash. That funding is an asset of Euroclear located within the European Central Bank.

The EU's executive recognizes Belgium has legitimate concerns and claims it is assured it has dealt with them.

The scheme is for Belgium to be safeguarded with a insurance covering 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 judgment by a Russian court would not be enforced 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.

Heretofore 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 planning to use an emergency clause under Article 122 of the EU Treaties so the assets stay blocked as long as an "direct danger to the economic security of the union" continues.

The Reasons Belgium is Not Yet Convinced

The Belgian government is adamant it remains a strong supporter of Ukraine, but sees regulatory pitfalls in the plan and worries about being forced to deal with the consequences if things go wrong.

A normally fractured political scene in this case has rallied behind Prime Minister Bart de Wever, who is under pressure from European colleagues.

"Belgium is a small economy. Belgian GDP is around €565bn – think about if it would need to shoulder a €185bn bill," says Veerle Colaert, academic specializing in financial regulation at KU Leuven University.

While the EU might be able to obtain enough guarantees for the loan itself, Belgium fears an additional danger of being subject to extra fines or liabilities.

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

"Banks need to follow stability regulations and shouldn't concentrate risk. Now the EU is asking Euroclear to do exactly that.

"What is the purpose of these banking laws? It's because we want banks to be secure. And if things go wrong it would fall to Belgium to save Euroclear. That's a further cause why it's so vital for Belgium to secure water-tight protections for Euroclear."

EU Leaders In a Difficult Position from Multiple Fronts

Time is of the essence, state several EU member states including those bordering Russia such as the Baltics, Finland and Poland. They believe the scheme involving immobilized capital is "a economically realistic and practically possible solution".

"It is a decisive moment for us," warns leading German conservative MP Norbert Röttgen. "Should we not succeed, I don't know what we'll do next. That's why we have to finalize the deal in a week's time".

While Russia is unyielding its money should not be touched, there are further worries among European figures that the US may want to employ Russia's immobilized billions for another purpose, as part of its own peace plan.

Zelensky has stated Ukraine is in discussions with Europe and the US on a rebuilding fund, but he is also aware the US has been holding discussions with Russia about future co-operation.

A preliminary version of the US peace plan referred to $100bn of Russia's frozen assets being used by the US for reconstruction, with the US {taking|receiving