Moscow Retaliates at the EU's Proposal to Lend Immobilized Moscow's Cash to Kyiv

Kyiv remains facing a severe shortage of funding to sustain its armed forces and economy, after close to 48 months of full-scale conflict with Russia.

In the view of European leaders, the remedy to filling Kyiv's funding gap 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 finalize the plan at their meeting in Brussels next week.

Russian officials warn the EU plan would be an confiscation, and Moscow's monetary authority stated on Friday it was suing Euroclear in a Moscow court even before a conclusive plan is made.

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

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

The EU and Ukraine argue that those funds should be used to restore what Russia has devastated: EU officials terms it a "reparations loan" and has come up with a plan to support Ukraine's economy valued at €90bn.

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

German Chancellor Friedrich Merz argues the assets will "allow Ukraine to protect itself efficiently against subsequent Russian attacks".

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

Belgium is worried it will be saddled with an huge bill if it all backfires, and Euroclear CEO Valérie Urbain says using the assets could "undermine the global financial architecture".

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

The leader of Belgium Bart de Wever has presented the EU with a series of "pragmatic, fair, and legitimate conditions" before he will accept the reparations plan, and he has not excluded legal action if it "poses significant risks" for his country.

What is the EU's Strategy?

Brussels is under pressure prior to next Thursday's summit to come up with a solution that Belgium can support.

Previously the EU has held off using the principal funds directly but for the past year has transferred the "windfall profits" from them to Ukraine. In 2024 that amounted to €3.7bn. From a legal standpoint, using the profits is deemed permissible as Russia is under sanction and the proceeds are not Moscow's sovereign assets.

But international military aid for Ukraine has fallen significantly in 2025, and Europe has found it difficult to cover the gap resulting from the US decision to virtually halt funding Ukraine under President Donald Trump.

There are presently two EU proposals seeking to providing Ukraine with €90bn, to finance two-thirds of its funding needs.

• The first is to borrow the funds on financial markets, guaranteed by the EU budget as a surety. This is Belgium's preferred option but it requires a agreement by all by EU leaders and that would be challenging when Hungary and Slovakia object to funding Ukraine's military.
• This makes the other option loaning Ukraine cash from the Russian assets, which were originally held in bonds but have now predominantly turned into cash. That money is an asset of Euroclear located within the European Central Bank.

The European Commission acknowledges Belgium has legitimate concerns and says it is confident it has resolved them.

The proposal is for Belgium to be safeguarded 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.

Should Russia went after Belgium itself, any judgment by a Russian court would not be accepted 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 by consensus every six months to continue the freeze, which could have meant a constant risk to Belgium.

The EU ambassadors are expected to use an emergency clause under Article 122 of the EU Treaties so the assets remain frozen as long as an "direct danger to the financial well-being of the union" continues.

Why Belgium is Not Yet Convinced

Belgium is firm it remains a staunch ally of Ukraine, but sees legal risks in the plan and is concerned about being shouldering the repercussions if things fail.

A usually fractured political scene in this case has rallied behind Prime Minister Bart de Wever, who is under pressure from fellow EU leaders.

"Belgium is a small economy. Belgian GDP is approximately €565bn – think about if it would need to bear a €185bn bill," says Veerle Colaert, expert in financial law at KU Leuven University.

While the EU might be able to arrange enough protections for the loan itself, Belgium worries about an added risk of being vulnerable to extra damages or penalties.

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

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

"Why do we have these bank rules? It's because we want banks to be secure. And if things go wrong it would be up to Belgium to bail out Euroclear. That's another reason why it's so important for Belgium to secure water-tight guarantees for Euroclear."

Europe Under Pressure from Every Direction

There is no time to lose, state seven EU member states including those bordering Russia such as the Baltics, Finland and Poland. They argue the scheme involving immobilized capital is "the fiscally viable and politically achievable solution".

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

Although Russia is insistent its money should not be accessed, there are additional apprehensions among EU officials that the US may want to use Russia's blocked funds in another way, as part of its own peace initiative.

Zelensky has indicated Ukraine is coordinating 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.

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