Russia Retaliates at Europe's Proposal to Loan Immobilized Moscow's Cash to Kyiv

Ukraine is depleting its cash to sustain its armed forces and economy, after nearly four years of the ongoing invasion by Moscow.

For Europe, the answer to plugging Ukraine's financial shortfall of €135.7bn for the coming 24 months is found in frozen Russian assets sitting in Belgian bank Euroclear, and European Union officials aim to finalize the plan at their meeting in Brussels next week.

Russian officials warn the EU plan would be an confiscation, and Moscow's monetary authority stated on Friday it was initiating legal action against Euroclear in a Moscow court ahead of a final decision is made.

'Appropriate' to Use Russia's Assets, Assert Ukraine and the EU

Overall, Russia has approximately €210bn of its state reserves frozen in the EU, and €185bn of that is in the custody of Euroclear.

Brussels and Kyiv maintain that that capital should be used to restore what Russia has devastated: The European Commission terms it a "reparations loan" and has proposed a plan to bolster Ukraine's economy amounting to €90bn.

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

Chancellor Friedrich Merz says the assets will "enable Ukraine to defend itself successfully against subsequent Russian attacks".

The legal move by Moscow was expected in Brussels. But it is not just Moscow that is dissatisfied.

The Belgian government is anxious it will be saddled with an enormous bill if it all backfires, and Euroclear chief executive Valérie Urbain says using the assets could "destabilise the global financial architecture".

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

Belgium's PM Bart de Wever has given Brussels a series of "pragmatic, fair, and legitimate conditions" before he will agree to the reparations plan, and he has refused to rule out legal action if it "carries significant risks" for his country.

The Details of the EU's Proposal?

European Union officials is working to the wire before next Thursday's summit to come up with a arrangement that Belgium can support.

Until now the EU has avoided using the frozen capital directly but for the past year has directed the "windfall profits" from them to Ukraine. In 2024 that was €3.7bn. Legally, using the revenue is deemed permissible as Russia is subject to sanctions and the proceeds are not property of the Russian state.

But international military aid for Ukraine has fallen significantly in 2025, and Europe has found it difficult to cover the deficit caused by the US decision to virtually halt funding Ukraine under President Donald Trump.

There are at the moment two EU plans aimed at furnishing Ukraine with €90bn, to cover two-thirds of its budgetary necessities.

• Option one is to secure the capital on financial markets, backed by the EU budget as a surety. This is Belgium's preferred option but it needs a unanimous vote by EU leaders and that would be difficult when Hungary and Slovakia oppose funding Ukraine's military.
• The alternative is providing a loan of Ukraine cash from the Moscow's immobilized capital, which were at first held in financial instruments but have now predominantly been converted into cash. That capital is an asset of Euroclear deposited at the European Central Bank.

The EU's executive acknowledges Belgium has justified fears and says it is assured it has addressed them.

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

Should Euroclear incur losses 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.

In the event that Russia targeted Belgium itself, any ruling by a Russian court would not be accepted in the EU.

In a significant move, EU ambassadors are poised to endorse on Friday to freeze indefinitely Russia's central bank assets held in Europe for the foreseeable future.

Heretofore they have had to vote by consensus every six months to renew 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 "immediate threat to the economic security of the union" continues.

Why Belgium is Still Not On Board

Belgium is adamant it remains a strong supporter of Ukraine, but identifies regulatory pitfalls in the plan and is concerned about being shouldering the repercussions if things go wrong.

A usually fractured political scene in this case has united behind Prime Minister Bart de Wever, who is facing pressure from other European officials.

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

While the EU might be able to obtain enough guarantees for the loan itself, Belgium worries about an added risk of being vulnerable to extra fines or liabilities.

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

"Lenders need to comply with capital and liquidity requirements and shouldn't put all their eggs in one basket. Now the EU is telling Euroclear to do exactly that.

"Why do we have these banking laws? It's because we want banks to be stable. And if things turn sour it would fall to Belgium to save Euroclear. That's a further cause why it's so crucial for Belgium to secure absolute protections for Euroclear."

EU Leaders In a Difficult Position from Every Direction

Time is of the essence, state seven EU member states including those bordering Russia such as the Baltics, Finland and Poland. They argue the scheme involving immobilized capital is "the most economically realistic and politically achievable 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 afterwards. That's why we have to reach an agreement in a week's time".

Although Russia is unyielding its money should not be touched, there are additional apprehensions among European figures that the US may want to deploy Russia's blocked funds for another purpose, as part of its own peace initiative.

Zelensky has stated Ukraine is in discussions with Europe and the US on a rebuilding fund, but he is also mindful the US has been talking to Russia about potential collaboration.

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