Moscow Responds at the EU's Proposal to Lend Frozen Moscow's Funds to Kyiv

Kyiv remains running out of financial resources to sustain its military and economy, after almost four years of Russia's full-scale war.

For Europe, the remedy to plugging Kyiv's budget hole of €135.7bn for the following biennium is found in Moscow's immobilized funds held by Belgian bank Euroclear, and Brussels aim to give it the green light at their EU leaders' conference next week.

Russian officials caution the EU plan would be an confiscation, and Russia's central bank declared on Friday it was initiating legal action against Euroclear in a Moscow court even before a final decision is made.

'Just' to Use Moscow's Funds, Say European and Ukrainian Officials

In total, Russia has about €210bn of its assets blocked in the EU, and €185bn of that is managed by Euroclear.

Brussels and Kyiv argue that money should be used to rebuild what Russia has laid waste to: EU officials terms it a "loan for reparations" and has come up with a plan to bolster Ukraine's economy amounting to €90bn.

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

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

Moscow's lawsuit was foreseen in Brussels. But it is not only Moscow that is dissatisfied.

Belgium is anxious it will be left with an huge bill if it all fails, and Euroclear CEO Valérie Urbain warns using the assets could "destabilise the global financial architecture".

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

The leader of Belgium 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.

The Details of the EU's Plan?

The EU is under pressure ahead of next Thursday's summit to finalize a arrangement that Belgium can agree to.

Until now the EU has avoided touching the principal funds directly but for the past year has transferred the "excess income" from them to Ukraine. In 2024 that totaled €3.7bn. Juridically, using the revenue is deemed less risky as Russia is under sanction and the earnings are not Russian sovereign property.

But international military aid for Ukraine has slipped dramatically in 2025, and Europe has found it difficult to cover the deficit left by the US decision to all but stop funding Ukraine under President Donald Trump.

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

• One is to secure the capital on the markets, guaranteed by the EU budget as a surety. This is Belgium's first choice but it needs a agreement by all by EU leaders and that would be difficult when Budapest and Bratislava oppose funding Ukraine's military.
• This makes the other option lending Ukraine cash from the Russian assets, which were originally held in financial instruments but have now predominantly matured into cash. That funding is Euroclear property deposited at the European Central Bank.

Brussels' executive arm recognizes Belgium has valid worries and states it is confident it has dealt with them.

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

Should Euroclear incur losses of its own assets in Russia, that would be offset from assets belonging to Russia's own clearing house which are in the EU.

Should Russia took legal action against Belgium itself, any judgment by a Russian court would not be enforced in the EU.

In a key development, EU ambassadors are expected to agree on Friday to permanently block Russia's central bank assets held in Europe for the foreseeable future.

Heretofore they have had to vote by consensus every six months to continue the freeze, which could have meant a repeated risk to Belgium.

The EU ambassadors are set to use an emergency clause under Article 122 of the EU Treaties so the assets stay blocked as long as an "immediate threat to the economic security of the union" continues.

The Reasons Belgium is Remains Satisfied

Brussels is adamant it remains a staunch ally of Ukraine, but identifies juridical dangers in the plan and worries about being left to handle the fallout if things go wrong.

A normally divided political landscape in this case has come together in support of Prime Minister Bart de Wever, who is under pressure from fellow EU leaders.

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

While the EU might be able to obtain adequate guarantees for the loan itself, Belgium is concerned about an added risk of being exposed to extra fines or liabilities.

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

"Banks need to comply with prudential rules 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 financial regulations? It's because we want banks to be secure. And if things fail it would be up to Belgium to bail out Euroclear. That's a further cause why it's so vital for Belgium to get ironclad guarantees for Euroclear."

The European Union Under Pressure from All Sides

The situation is urgent, warn a group of EU member states including those closest to Russia such as the Baltics, Finland and Poland. They believe the scheme involving immobilized capital is "the most fiscally viable and politically achievable solution".

"It's a matter of destiny for us," says 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 succeed in a week's time".

Although Russia is insistent its money should not be used, there are further worries among European figures that the US may want to use Russia's blocked funds differently, as part of its own peace initiative.

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

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