Russia Retaliates at the EU's Proposal to Lend Frozen Russian Assets to Ukraine

Ukraine is depleting its funding to keep going its armed forces and economy, after close to 48 months of full-scale conflict with Russia.

From the EU's perspective, the answer to plugging Kyiv's funding gap of €135.7bn for the next two years rests with assets belonging to Russia that are frozen held by Belgian bank Euroclear, and EU leaders seek to sign that off at their meeting in Brussels next week.

Moscow's representatives caution the EU plan would be an act of theft, and Moscow's monetary authority declared on Friday it was suing Euroclear in a Moscow court even before a definitive agreement is made.

'Only Fair' to Employ Moscow's Assets, Argue Kyiv and Brussels

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

Brussels and Kyiv contend that those funds should be used to reconstruct what Russia has laid waste to: Brussels refers to it as a "loan for reparations" and has proposed a plan to prop up Ukraine's economy amounting to €90bn.

"It's only fair that the assets frozen from Russia should be used to rebuild what Russia has destroyed – and that money then becomes ours," remarks Ukrainian President Volodymyr Zelensky.

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

Moscow's lawsuit was anticipated in Brussels. But it is not only Moscow that is unhappy.

Authorities in Brussels is anxious it will be saddled with an massive bill if it all fails, and Euroclear CEO Valérie Urbain argues using the assets could "destabilise the world's financial order".

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

Belgium's PM Bart de Wever has presented the EU with a series of "rational, reasonable, and justified conditions" before he will accept the reconstruction loan scheme, and he has left open the possibility of legal action if it "presents significant risks" for his country.

What is the EU's Strategy?

Brussels is working to the wire before next Thursday's summit to come up with a compromise that Belgium can support.

So far the EU has avoided touching the assets themselves directly but starting in 2024 has paid the "windfall profits" from them to Ukraine. In 2024 that totaled €3.7bn. Legally, using the revenue is considered safe as Russia is under sanction 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 cover the deficit resulting from the US decision to all but stop funding Ukraine under President Donald Trump.

There are currently two EU proposals aimed at furnishing Ukraine with €90bn, to finance a majority of its funding needs.

• Option one is to raise the money on capital markets, backed by the EU budget as a collateral. This is Belgium's first choice but it needs a unanimous vote 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 frozen Russian funds, which were at first held in financial instruments but have now predominantly turned into cash. That money is an asset of Euroclear located within the European Central Bank.

Brussels' executive arm acknowledges Belgium has justified fears and states it is assured it has addressed them.

The proposal 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 took legal action against Belgium itself, any judgment by a Russian court would not be recognized in the EU.

As an important step, EU ambassadors are set to approve on Friday to permanently block Russia's central bank assets held in Europe for the foreseeable future.

Heretofore they have had to vote all together every six months to renew the freeze, which could have meant a ongoing risk to Belgium.

The EU ambassadors are expected to use an extraordinary measure under Article 122 of the EU Treaties so the assets continue to be immobilized as long as an "clear risk to the economic security of the union" continues.

The Reasons Belgium is Not Yet Satisfied

The Belgian government is insistent it remains a committed partner of Ukraine, but sees legal risks in the plan and worries about being shouldering the fallout if things fail.

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

"Belgium is a small economy. Belgian GDP is about €565bn – consider 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 arrange sufficient protections for the loan itself, Belgium worries about an further exposure of being subject to extra legal costs.

Prof Colaert also contends the stipulation for Euroclear to issue credit to the EU would breach EU banking regulations.

"Financial institutions need to adhere to stability regulations and shouldn't concentrate risk. Now the EU is instructing Euroclear to do precisely that.

"What is the purpose of these banking laws? It's because we want banks to be stable. And if things fail it would become the responsibility of Belgium to save Euroclear. That's a further cause why it's so vital for Belgium to get ironclad assurances for Euroclear."

Europe Under Pressure from Multiple Fronts

Time is of the essence, state several EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They maintain the scheme involving immobilized capital is "the most financially feasible and practically possible solution".

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

While Russia is adamant its money should not be accessed, there are added concerns among European figures that the US may want to use Russia's blocked funds in another way, as part of its own diplomatic proposal.

Zelensky has said Ukraine is working with Europe and the US on a rebuilding fund, but he is also mindful the US has been holding discussions with Russia about possible partnership.

An early draft of the US peace plan referred to $100bn of Russia's immobilized capital being used by the US for reconstruction, with the US {taking|receiving