Moscow Responds at Europe's Proposal to Loan Frozen Moscow's Funds to Ukraine

Kyiv remains facing a severe shortage of cash to sustain its armed forces and economy afloat, after almost four years of the ongoing invasion by Moscow.

For Europe, the answer to addressing Ukraine's budget hole of €135.7bn for the following biennium is found in frozen Russian assets held by Belgian bank Euroclear, and EU leaders aim to finalize the plan at their Brussels summit next week.

Moscow's representatives state the EU plan would be an confiscation, and the Central Bank of Russia announced on Friday it was suing Euroclear in a Moscow court even before a definitive agreement is made.

'Only Fair' 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.

Brussels and Kyiv argue that those funds should be used to reconstruct what Russia has destroyed: Brussels calls it a "loan for reparations" and has devised a plan to bolster Ukraine's economy to the tune of €90bn.

"It is only just that Russia's frozen assets should be used to rebuild what Russia has destroyed – and that that capital then becomes Ukraine's," states Ukraine's Volodymyr Zelensky.

Germany's leader Friedrich Merz says the assets will "help Ukraine to protect itself successfully against any future Russian attacks".

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

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

Euroclear also has an estimated €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 accept the reconstruction loan scheme, and he has refused to rule out legal action if it "poses significant risks" for his country.

Explaining the EU's Strategy?

Brussels is under pressure ahead of next Thursday's summit to come up with a arrangement that Belgium can agree to.

Until now the EU has refrained from accessing the assets themselves directly but since last year has transferred the "excess income" from them to Ukraine. In 2024 that amounted to €3.7bn. From a legal standpoint, using the profits is seen as safe as Russia is subject to sanctions and the returns are not Moscow's sovereign assets.

But global military support for Ukraine has declined sharply in 2025, and Europe has had trouble trying to compensate for the deficit resulting from the US decision to virtually halt funding Ukraine under President Donald Trump.

There are at the moment two EU proposals designed to providing Ukraine with €90bn, to cover a large portion of its financial requirements.

• Option one is to secure the capital on financial markets, guaranteed by the EU budget as a collateral. This is Belgium's preferred option 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 loaning Ukraine cash from the frozen Russian funds, which were initially held in financial instruments but have now mostly matured into cash. That capital is an asset of Euroclear located within the European Central Bank.

Brussels' executive arm acknowledges Belgium has justified fears and states it is confident it has addressed them.

The plan is for Belgium to be shielded with a guarantee covering 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 judgment by a Russian court would not be recognized 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 permanently.

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

The EU ambassadors are planning to use an special provision 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.

The Reasons Belgium is Not Yet Satisfied

The Belgian government is adamant it remains a committed partner of Ukraine, but identifies regulatory pitfalls in the plan and fears being forced to deal with the repercussions if things do not work out.

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

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

While the EU might be able to arrange enough assurances for the loan itself, Belgium is concerned about an added risk of being subject to extra damages or penalties.

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

"Banks need to comply with prudential rules and shouldn't make one enormous loan. Now the EU is asking Euroclear to do just that.

"Why do we have these financial regulations? It's because we want banks to be secure. And if things fail it would be up to Belgium to bail out Euroclear. That's an additional reason why it's so crucial for Belgium to obtain ironclad guarantees for Euroclear."

EU Leaders Under Pressure from Multiple Fronts

There is no time to lose, state a group of EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They believe the proposal to use Russian funds is "the most fiscally viable and practically possible solution".

"It is a decisive moment for us," warns 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 reach an agreement in a week's time".

Although Russia is unyielding its money should not be touched, there are additional apprehensions among European figures that the US may want to employ Russia's frozen billions in another way, as part of its own diplomatic proposal.

Zelensky has said 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 potential collaboration.

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