Russia Retaliates at Europe's Scheme to Loan Immobilized Russian Cash to Kyiv

Ukraine is facing a severe shortage of funding to sustain its armed forces and economy, after nearly four years of the ongoing invasion by Moscow.

In the view of European leaders, the solution to addressing Ukraine's financial shortfall of €135.7bn for the coming 24 months is found in frozen Russian assets held by Belgian bank Euroclear, and European Union officials aim to sign that off at their EU leaders' conference next week.

Authorities in Russia caution the EU plan would be an confiscation, and the Central Bank of Russia announced on Friday it was suing Euroclear in a Moscow court ahead of a definitive agreement is made.

'Only Fair' to Employ Moscow's Funds, Say Ukraine and the EU

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

The EU and Ukraine contend that money should be used to rebuild what Russia has destroyed: The European Commission refers to it as a "loan for reparations" and has devised a plan to bolster Ukraine's economy valued at €90bn.

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

German Chancellor Friedrich Merz says the assets will "help Ukraine to shield itself effectively against any future Russian attacks".

Moscow's lawsuit was expected in Brussels. But it is not only Moscow that is unhappy.

The Belgian government is concerned it will be burdened by an huge bill if it all goes wrong, and Euroclear CEO Valérie Urbain warns using the assets could "disrupt the international financial system".

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

Belgian Prime Minister 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 "carries significant risks" for his country.

What is the EU's Strategy?

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

Previously the EU has avoided 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. Legally, using the interest is deemed safe as Russia is sanctioned and the proceeds are not Russian sovereign property.

But international military aid for Ukraine has declined sharply in 2025, and Europe has had trouble trying to cover the gap 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 supplying Ukraine with €90bn, to pay for two-thirds of its funding needs.

• Option one is to borrow the funds on financial markets, backed by the EU budget as a surety. This is Belgium's first choice but it demands a consensus by EU leaders and that would be challenging when Budapest and Bratislava are against funding Ukraine's military.
• This makes the other option providing a loan of Ukraine cash from the frozen Russian funds, which were at first held in financial instruments but have now largely matured into cash. That capital is an asset of Euroclear held in the European Central Bank.

Brussels' executive arm acknowledges Belgium has valid worries and says it is confident it has resolved them.

The proposal 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 went after 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 indefinitely.

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

The EU ambassadors are planning 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 financial well-being of the union" continues.

Why Belgium is Remains Satisfied

Belgium is insistent it remains a strong supporter of Ukraine, but perceives regulatory pitfalls in the plan and fears being left to handle the consequences if things do not work out.

A typically partisan political environment in this case has rallied behind Prime Minister Bart de Wever, who is being pressured from European colleagues.

"The Belgian economy is not large. Belgian GDP is approximately €565bn – imagine if it would need to carry a €185bn bill," comments Veerle Colaert, academic specializing in financial regulation at KU Leuven University.

Although the EU might be able to secure adequate assurances for the loan itself, Belgium worries about an further exposure of being exposed to extra fines or liabilities.

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

"Lenders need to adhere to stability regulations and shouldn't put all their eggs in one basket. Now the EU is asking Euroclear to do just that.

"What is the purpose of these banking laws? It's because we want banks to be stable. And if things fail it would become the responsibility of Belgium to bail out Euroclear. That's another reason why it's so crucial for Belgium to secure ironclad guarantees for Euroclear."

Europe Under Pressure from All Sides

Time is of the essence, state several EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They believe the frozen assets plan is "a economically realistic and practically possible solution".

"This is a crucial test for us," warns leading German conservative MP Norbert Röttgen. "If we fail, I don't know what we'll do subsequently. That's why we have to succeed in a week's time".

Although Russia is insistent its money should not be touched, there are additional apprehensions among EU officials that the US may want to employ Russia's frozen billions for another purpose, as part of its own peace plan.

Zelensky has indicated Ukraine is coordinating with Europe and the US on a reconstruction fund, but he is also aware the US has been holding discussions with Russia about future co-operation.

An early draft of the US peace plan referred to $100bn of Russia's blocked funds being used by the US for reconstruction, with the US {taking|receiving