Moscow Retaliates at Europe's Proposal to Loan Immobilized Moscow's Cash to Ukraine

Kyiv remains running out of cash to sustain its armed forces and economy, after nearly four years of full-scale conflict with Russia.

From the EU's perspective, the answer to addressing Kyiv's budget hole of €135.7bn for the coming 24 months is found in Moscow's immobilized funds 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 illegal seizure, and the Central Bank of Russia declared on Friday it was initiating legal action against Euroclear in a Moscow court even before a definitive agreement is made.

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

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

The EU and Ukraine argue that money should be used to rebuild what Russia has devastated: Brussels terms it a "reconstruction loan" and has devised a plan to bolster Ukraine's economy valued at €90bn.

"It's only fair that Moscow's blocked funds should be used to rebuild what Russia has devastated – and that that capital then becomes Ukraine's," says Ukraine's Volodymyr Zelensky.

Germany's leader Friedrich Merz says the assets will "help Ukraine to shield itself effectively against subsequent Russian attacks".

Russia's court action was expected in Brussels. But it is not only Moscow that is unhappy.

Belgium is anxious it will be burdened by an huge bill if it all backfires, and Euroclear chief executive Valérie Urbain warns using the assets could "undermine the world's financial order".

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

Belgium's PM Bart de Wever has given Brussels a series of "logical, sensible, and warranted conditions" before he will endorse the reparations plan, and he has left open the possibility of legal action if it "presents significant risks" for his country.

The Details of the EU's Strategy?

Brussels is racing against time prior to next Thursday's summit to agree on a arrangement that Belgium can support.

So far the EU has avoided accessing the assets themselves directly but for the past year has directed the "windfall profits" from them to Ukraine. In 2024 that was €3.7bn. Legally, using the interest is considered permissible as Russia is sanctioned and the returns are not Moscow's sovereign assets.

But global military support for Ukraine has slipped dramatically in 2025, and Europe has struggled to cover the shortfall resulting from the US decision to largely cease funding Ukraine under President Donald Trump.

There are currently two EU plans designed to supplying Ukraine with €90bn, to pay for a large portion of its budgetary necessities.

• One is to raise the money on financial markets, secured against the EU budget as a collateral. This is Belgium's preferred option but it demands a agreement by all by EU leaders and that would be problematic when two member states are against funding Ukraine's military.
• The alternative is loaning Ukraine cash from the Moscow's immobilized capital, which were originally held in financial instruments but have now mostly turned into cash. That money is an asset of Euroclear held in the European Central Bank.

The EU's executive accepts Belgium has valid worries and says it is confident it has addressed them.

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

If Euroclear suffer a loss 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.

If Russia went after Belgium itself, any decision by a Russian court would not be enforced in the EU.

In a key development, EU ambassadors are poised to endorse on Friday to freeze indefinitely Russia's central bank assets held in Europe indefinitely.

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

The EU ambassadors are set to use an special provision under Article 122 of the EU Treaties so the assets remain frozen as long as an "clear risk to the economic security of the union" continues.

Why Belgium is Remains Convinced

Brussels is firm it remains a staunch ally of Ukraine, but perceives legal risks in the plan and fears being shouldering the fallout if things do not work out.

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

"Belgium is a small economy. Belgian GDP is around €565bn – consider if it would need to carry a €185bn bill," says Veerle Colaert, professor of financial law at KU Leuven University.

While the EU might be able to obtain adequate assurances for the loan itself, Belgium is concerned about an further exposure of being subject to extra legal costs.

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

"Lenders need to adhere to 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 stable. And if things turn sour it would be up to Belgium to rescue Euroclear. That's another reason why it's so vital for Belgium to get water-tight protections for Euroclear."

The European Union Under Pressure from All Sides

The situation is urgent, caution a group of EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They maintain the scheme involving immobilized capital is "a financially feasible and politically achievable solution".

"It's a matter of destiny for us," warns 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".

Although Russia is adamant its money should not be accessed, there are added concerns among EU officials that the US may want to deploy Russia's blocked funds for another purpose, as part of its own diplomatic proposal.

Zelensky has indicated Ukraine is working with Europe and the US on a recovery fund, but he is also mindful the US has been holding discussions with Russia about potential collaboration.

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