Moscow Responds at Europe's Proposal to Loan Frozen Russian Assets to Kyiv

Kyiv remains depleting its funding to keep going its armed forces and economy afloat, after almost four years of Russia's full-scale war.

For Europe, the solution to addressing Ukraine's financial shortfall of €135.7bn for the next two years is found in frozen Russian assets sitting in Belgian bank Euroclear, and EU leaders aim to give it the green light at their EU leaders' conference next week.

Russian officials caution the EU plan would be an illegal seizure, and the Central Bank of Russia announced on Friday it was initiating legal action against Euroclear in a Moscow court prior to a conclusive plan is made.

'Just' to Employ Moscow's Assets, Assert Kyiv and Brussels

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

European and Ukrainian authorities maintain that money should be used to reconstruct what Russia has devastated: EU officials calls it a "loan for reparations" and has come up with a plan to prop up Ukraine's economy amounting to €90bn.

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

Chancellor Friedrich Merz says the assets will "enable Ukraine to shield itself efficiently against any future Russian attacks".

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

Belgium is worried it will be saddled with an massive bill if it all goes wrong, and Euroclear chief executive Valérie Urbain argues using the assets could "destabilise the international financial system".

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

Belgian Prime Minister Bart de Wever has given Brussels a series of "logical, sensible, and warranted conditions" before he will accept the reconstruction loan scheme, and he has refused to rule out legal action if it "carries significant risks" for his country.

What is the EU's Proposal?

European Union officials is racing against time prior to next Thursday's summit to finalize a compromise that Belgium can agree to.

So far the EU has held off accessing the assets themselves directly but starting in 2024 has transferred the "excess income" from them to Ukraine. In 2024 that totaled €3.7bn. Legally, using the profits is considered permissible as Russia is sanctioned and the returns are not property of the Russian state.

But international military aid for Ukraine has slipped dramatically in 2025, and Europe has had trouble trying to make up the shortfall resulting from the US decision to largely cease funding Ukraine under President Donald Trump.

There are presently two EU plans aimed at supplying Ukraine with €90bn, to finance a majority of its funding needs.

• The first is to secure the capital on the markets, backed by the EU budget as a surety. This is Belgium's favored solution but it demands a unanimous vote by EU leaders and that would be challenging when Hungary and Slovakia object to funding Ukraine's military.
• This makes the other option lending Ukraine cash from the frozen Russian funds, which were at first held in bonds but have now predominantly been converted into cash. That funding is Euroclear property deposited at the European Central Bank.

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

The proposal is for Belgium to be shielded with a insurance applying to 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 settlement agency which are in the EU.

If Russia took legal action against Belgium itself, any decision by a Russian court would not be accepted in the EU.

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

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

The EU ambassadors are expected to use an extraordinary measure under Article 122 of the EU Treaties so the assets stay blocked as long as an "immediate threat to the economic interests of the union" continues.

The Reasons Belgium is Not Yet Satisfied

The Belgian government is adamant it remains a strong supporter of Ukraine, but perceives regulatory pitfalls in the plan and worries about being forced to deal with the fallout if things fail.

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

"The Belgian economy is not large. Belgian GDP is about €565bn – consider if it would need to shoulder a €185bn bill," says Veerle Colaert, expert in financial law at KU Leuven University.

Although the EU might be able to obtain enough guarantees for the loan itself, Belgium fears an added risk of being exposed to extra fines or liabilities.

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

"Financial institutions need to adhere to prudential rules and shouldn't make one enormous loan. Now the EU is telling Euroclear to do precisely that.

"What is the purpose of these financial regulations? It's because we want banks to be solvent. And if things fail it would be up to Belgium to rescue Euroclear. That's a further cause why it's so crucial for Belgium to obtain absolute protections for Euroclear."

EU Leaders Facing Strain from All Sides

The situation is urgent, state a group of EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They maintain the scheme involving immobilized capital is "the most fiscally viable and practically possible solution".

"It is a decisive moment for us," says leading German conservative MP Norbert Röttgen. "If we fail, I don't know what we'll do subsequently. That's why we have to finalize the deal in a week's time".

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

Zelensky has stated Ukraine is coordinating with Europe and the US on a rebuilding fund, but he is also aware the US has been engaging with Russia about future co-operation.

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