Russia Retaliates at the EU's Proposal to Loan Frozen Russian Assets to Kyiv

Ukraine is depleting its financial resources to sustain its armed forces and economy, after close to 48 months of Russia's full-scale war.

For Europe, the answer to filling Ukraine's budget hole of €135.7bn for the next two years lies in frozen Russian assets held by Belgian bank Euroclear, and European Union officials hope to finalize the plan at their EU leaders' conference next week.

Russian officials warn the EU plan would be an act of theft, and Russia's central bank stated on Friday it was taking to court Euroclear in a Moscow court even before a definitive agreement is made.

'Just' to Utilize Russia's Assets, Say Kyiv and Brussels

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

European and Ukrainian authorities argue that those funds should be used to reconstruct what Russia has destroyed: Brussels calls it a "loan for reparations" and has devised a plan to support Ukraine's economy amounting to €90bn.

"It is appropriate that Moscow's blocked funds should be used to rebuild what Russia has destroyed – and that those funds then becomes Ukraine's," remarks Ukraine's Volodymyr Zelensky.

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

Russia's court action was anticipated in Brussels. But it is not just Moscow that is concerned.

Authorities in Brussels is anxious it will be saddled with an massive bill if it all fails, and Euroclear head Valérie Urbain argues using the assets could "disrupt the international financial system".

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

The leader of Belgium Bart de Wever has set the EU a series of "rational, reasonable, and justified 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 Plan?

The EU is working to the wire ahead of next Thursday's summit to agree on a arrangement that Belgium can support.

Until now the EU has refrained from accessing the principal funds directly but since last year has paid the "extraordinary revenues" from them to Ukraine. In 2024 that amounted to €3.7bn. From a legal standpoint, using the profits is deemed permissible as Russia is subject to sanctions and the earnings are not Russian sovereign property.

But international military aid for Ukraine has declined sharply in 2025, and Europe has struggled to make up the shortfall left by the US decision to largely cease funding Ukraine under President Donald Trump.

There are at the moment two EU options aimed at supplying Ukraine with €90bn, to pay for a large portion of its financial requirements.

• One is to borrow the funds on financial markets, guaranteed by the EU budget as a collateral. This is Belgium's first choice but it demands a agreement by all by EU leaders and that would be problematic when two member states oppose funding Ukraine's military.
• The alternative is loaning Ukraine cash from the Moscow's immobilized capital, which were at first held in securities but have now predominantly been converted into cash. That funding is an asset of Euroclear deposited at the European Central Bank.

The EU's executive accepts Belgium has justified fears and claims it is confident it has dealt with them.

The plan is for Belgium to be safeguarded with a assurance 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.

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

In a significant move, EU ambassadors are set to approve on Friday to immobilise Russia's central bank assets held in Europe permanently.

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

The EU ambassadors are expected 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 interests of the union" continues.

Why Belgium is Still Not Convinced

The Belgian government is adamant it remains a strong supporter of Ukraine, but identifies juridical dangers in the plan and fears being shouldering the fallout if things fail.

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

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

Although the EU might be able to arrange adequate assurances for the loan itself, Belgium worries about an additional danger of being subject to extra damages or penalties.

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

"Financial institutions need to follow capital and liquidity requirements and shouldn't make one enormous loan. 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 bail out Euroclear. That's a further cause why it's so crucial for Belgium to secure water-tight guarantees for Euroclear."

EU Leaders In a Difficult Position from All Sides

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

"It is a decisive moment for us," states leading German conservative MP Norbert Röttgen. "If the plan collapses, I don't know what we'll do next. That's why we have to reach an agreement in a week's time".

While Russia is unyielding its money should not be touched, there are additional apprehensions among EU officials that the US may want to deploy Russia's immobilized billions in another way, as part of its own peace initiative.

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

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