Russia Retaliates at Europe's Proposal to Loan Frozen Russian Funds to Ukraine

Ukraine is running out of cash to maintain its armed forces and economy, after nearly four years of Russia's full-scale war.

From the EU's perspective, the answer to addressing Ukraine's funding gap of €135.7bn for the next two years lies in assets belonging to Russia that are frozen sitting in Belgian bank Euroclear, and European Union officials aim to give it the green light at their meeting in Brussels next week.

Moscow's representatives warn the EU plan would be an confiscation, and Russia's central bank stated on Friday it was suing Euroclear in a Moscow court ahead of a final decision is made.

'Appropriate' to Utilize Russia's Funds, Say European and Ukrainian Officials

Overall, Russia has roughly €210bn of its assets frozen in the EU, and €185bn of that is managed by Euroclear.

The EU and Ukraine contend that that capital should be used to rebuild what Russia has devastated: The European Commission terms it a "reconstruction loan" and has proposed a plan to support Ukraine's economy to the tune of €90bn.

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

Chancellor Friedrich Merz says the assets will "enable Ukraine to shield itself successfully against any future Russian attacks".

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

Belgium is concerned it will be left with an huge bill if it all goes wrong, and Euroclear chief executive Valérie Urbain warns using the assets could "undermine the world's financial order".

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

Belgian Prime Minister Bart de Wever has presented the EU with a series of "logical, sensible, and warranted conditions" before he will endorse the reparations plan, and he has not excluded legal action if it "poses significant risks" for his country.

Explaining the EU's Proposal?

European Union officials is racing against time before next Thursday's summit to agree on a solution that Belgium can support.

So far the EU has refrained from using the assets themselves directly but since last year has directed the "excess income" from them to Ukraine. In 2024 that was €3.7bn. From a legal standpoint, using the revenue is deemed less risky as Russia is under sanction and the returns are not Russian sovereign property.

But global military support for Ukraine has declined sharply in 2025, and Europe has had trouble trying to cover the deficit caused by the US decision to all but stop funding Ukraine under President Donald Trump.

There are at the moment two EU proposals designed to supplying Ukraine with €90bn, to pay for two-thirds of its funding needs.

• Option one is to raise the money on capital markets, backed by 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 object to funding Ukraine's military.
• The alternative is loaning Ukraine cash from the frozen Russian funds, which were initially held in bonds but have now mostly turned into cash. That money is owned by Euroclear held in the European Central Bank.

Brussels' executive arm accepts Belgium has justified fears and claims it is convinced it has dealt with them.

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

If Euroclear incur losses of its own assets in Russia, that would be offset 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 recognized in the EU.

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

Until now they have had to vote unanimously every six months to extend the freeze, which could have meant a repeated risk to Belgium.

The EU ambassadors are expected 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 financial well-being of the union" continues.

The Reasons Belgium is Not Yet Convinced

Brussels is firm it remains a committed partner of Ukraine, but sees regulatory pitfalls in the plan and is concerned about being forced to deal with the repercussions if things go wrong.

A usually partisan political environment 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," comments Veerle Colaert, expert in financial law at KU Leuven University.

Although the EU might be able to secure sufficient protections for the loan itself, Belgium worries about an additional danger of being exposed to extra legal costs.

Prof Colaert also contends the requirement for Euroclear to issue credit to the EU would violate 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 secure. And if things turn sour it would fall to Belgium to rescue Euroclear. That's another reason why it's so vital for Belgium to secure ironclad guarantees for Euroclear."

The European Union Facing Strain from All Sides

Time is of the essence, caution seven EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They maintain the scheme involving immobilized capital is "the most economically realistic and practically possible solution".

"It is a decisive moment for us," states 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 adamant its money should not be touched, there are further worries among EU officials that the US may want to employ Russia's frozen billions differently, as part of its own diplomatic proposal.

Zelensky has stated Ukraine is in discussions with Europe and the US on a reconstruction fund, but he is also cognizant the US has been engaging with Russia about possible partnership.

An early draft 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