Moscow Hits Back at Europe's Scheme to Lend Immobilized Russian Funds to Ukraine

Ukraine is running out of funding to keep going its military and economy afloat, after almost four years of full-scale conflict with Russia.

For Europe, the solution to addressing Kyiv's funding gap of €135.7bn for the coming 24 months lies in assets belonging to Russia that are frozen located within Belgian bank Euroclear, and European Union officials seek to give it the green light at their Brussels summit next week.

Moscow's representatives caution the EU plan would be an illegal seizure, and Moscow's monetary authority announced on Friday it was initiating legal action against Euroclear in a Moscow court even before a definitive agreement is made.

'Just' to Employ Russia's Funds, Assert European and Ukrainian Officials

Overall, Russia has approximately €210bn of its state reserves blocked in the EU, and €185bn of that is managed by Euroclear.

The EU and Ukraine maintain that that capital should be used to restore what Russia has laid waste to: Brussels calls it a "reconstruction loan" and has proposed a plan to prop up Ukraine's economy valued at €90bn.

"It's only fair that Moscow's blocked funds should be used to rebuild what Russia has destroyed – and that those funds then becomes Ukraine's," states Ukrainian President Volodymyr Zelensky.

Germany's leader Friedrich Merz says the assets will "enable Ukraine to defend itself effectively against any future Russian attacks".

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

Belgium is worried it will be saddled with an huge bill if it all backfires, and Euroclear head Valérie Urbain warns using the assets could "disrupt the world's financial order".

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

Belgian Prime Minister Bart de Wever has given Brussels a series of "rational, reasonable, and justified conditions" before he will agree to 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 Proposal?

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

Previously the EU has avoided touching the assets themselves directly but since last year has paid the "extraordinary revenues" from them to Ukraine. In 2024 that was €3.7bn. Juridically, using the profits is seen as less risky as Russia is subject to sanctions and the proceeds are not Moscow's sovereign assets.

But foreign defense assistance for Ukraine has slipped dramatically in 2025, and Europe has struggled to compensate for the shortfall caused by the US decision to largely cease funding Ukraine under President Donald Trump.

There are currently two EU proposals aimed at furnishing Ukraine with €90bn, to cover a majority of its budgetary necessities.

• The first is to raise the money on capital markets, backed by the EU budget as a surety. This is Belgium's favored solution but it needs a unanimous vote by EU leaders and that would be difficult when Hungary and Slovakia oppose funding Ukraine's military.
• This makes the other option providing a loan of Ukraine cash from the Moscow's immobilized capital, which were originally held in financial instruments but have now predominantly turned into cash. That funding is owned by Euroclear held in the European Central Bank.

The EU's executive recognizes Belgium has justified fears and says it is confident it has addressed them.

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

Should Euroclear face a financial hit of its own assets in Russia, the loss would be compensated from assets belonging to Russia's own clearing house which are in the EU.

In the event that Russia took legal action against Belgium itself, any ruling by a Russian court would not be accepted in the EU.

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

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

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

The Reasons Belgium is Remains Satisfied

Brussels is firm it remains a committed partner of Ukraine, but sees legal risks in the plan and is concerned about being left to handle the consequences if things do not work out.

A usually partisan political environment in this case has come together in support of Prime Minister Bart de Wever, who is being pressured from fellow EU leaders.

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

While the EU might be able to arrange sufficient protections for the loan itself, Belgium fears an further exposure of being exposed to extra damages or penalties.

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

"Banks need to comply with capital and liquidity requirements and shouldn't concentrate risk. Now the EU is asking Euroclear to do just that.

"Why do we have these banking laws? It's because we want banks to be stable. 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 water-tight guarantees for Euroclear."

EU Leaders Facing Strain from All Sides

There is no time to lose, caution a group of EU member states including those bordering Russia such as the Baltics, Finland and Poland. They believe the scheme involving immobilized capital is "a fiscally viable and practically possible solution".

"It's a matter of destiny for us," says leading German conservative MP Norbert Röttgen. "If the plan collapses, I don't know what we'll do subsequently. That's why we have to succeed in a week's time".

While Russia is adamant its money should not be used, there are additional apprehensions among European figures that the US may want to use Russia's immobilized billions for another purpose, as part of its own diplomatic proposal.

Zelensky has stated Ukraine is in discussions with Europe and the US on a recovery fund, but he is also mindful the US has been talking to Russia about future co-operation.

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