Moscow Retaliates at Europe's Proposal to Lend Immobilized Moscow's Cash to Kyiv

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

From the EU's perspective, the answer to filling Kyiv's financial shortfall of €135.7bn for the following biennium rests with frozen Russian assets held by Belgian bank Euroclear, and EU leaders hope to finalize the plan at their meeting in Brussels next week.

Moscow's representatives caution the EU plan would be an act of theft, and Moscow's monetary authority stated on Friday it was initiating legal action against Euroclear in a Moscow court even before a final decision is made.

'Only Fair' to Employ Moscow's Funds, Assert Kyiv and Brussels

All told, Russia has about €210bn of its funds blocked in the EU, and €185bn of that is held by Euroclear.

European and Ukrainian authorities contend that those funds should be used to restore what Russia has laid waste to: The European Commission terms it a "reparations loan" and has devised a plan to prop up Ukraine's economy to the tune of €90bn.

"It is appropriate that the assets frozen from Russia should be used to rebuild what Russia has destroyed – and that those funds then becomes Ukraine's," says Ukrainian President Volodymyr Zelensky.

Chancellor Friedrich Merz states the assets will "help Ukraine to defend itself efficiently against any future Russian attacks".

The legal move by Moscow was expected in Brussels. But it is not only Moscow that is unhappy.

Authorities in Brussels is worried it will be saddled with an enormous bill if it all goes wrong, and Euroclear CEO Valérie Urbain says using the assets could "destabilise the international financial system".

Euroclear also has an roughly €16-17bn immobilised 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 agree to the reparations plan, and he has refused to rule out legal action if it "carries significant risks" for his country.

What is the EU's Plan?

European Union officials is under pressure ahead of next Thursday's summit to come up with a arrangement that Belgium can accept.

Until now the EU has refrained from using the frozen capital directly but starting in 2024 has transferred the "excess income" from them to Ukraine. In 2024 that was €3.7bn. Legally, using the profits is deemed permissible as Russia is subject to sanctions and the returns are not property of the Russian state.

But foreign defense assistance for Ukraine has fallen significantly in 2025, and Europe has struggled to make up the shortfall caused 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 two-thirds of its funding needs.

• The first 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 difficult when two member states oppose funding Ukraine's military.
• The alternative is providing a loan of Ukraine cash from the Russian assets, which were originally held in bonds but have now mostly turned into cash. That money is Euroclear property held in the European Central Bank.

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

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

If Euroclear face a financial hit 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 took legal action against Belgium itself, any decision by a Russian court would not be recognized in the EU.

As an important step, EU ambassadors are set to approve on Friday to permanently block Russia's central bank assets held in Europe permanently.

Previously they have had to vote unanimously every six months to extend 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 Not Yet On Board

Belgium is insistent it remains a committed partner of Ukraine, but identifies legal risks in the plan and is concerned about being shouldering the fallout if things go wrong.

A usually partisan political environment in this case has united behind Prime Minister Bart de Wever, who is facing pressure from other European officials.

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

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

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

"Banks need to adhere to capital and liquidity requirements and shouldn't concentrate risk. Now the EU is instructing Euroclear to do exactly that.

"Why do we have these banking laws? It's because we want banks to be secure. And if things go wrong it would fall to Belgium to save Euroclear. That's an additional reason why it's so crucial for Belgium to get water-tight protections for Euroclear."

Europe Under Pressure from Every Direction

Time is of the essence, state several EU member states including those bordering Russia such as the Baltics, Finland and Poland. They believe the scheme involving immobilized capital is "a financially feasible and politically realistic 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 finalize the deal in a week's time".

While Russia is adamant its money should not be touched, there are added concerns among European figures that the US may want to employ Russia's immobilized billions in another way, as part of its own peace initiative.

Zelensky has said Ukraine is coordinating with Europe and the US on a recovery fund, but he is also cognizant the US has been talking to Russia about future co-operation.

An initial document of the US peace plan mentioned $100bn of Russia's frozen assets being used by the US for reconstruction, with the US {taking|receiving