Moscow Retaliates at the EU's Scheme to Lend Frozen Moscow's Cash to Ukraine

Ukraine is facing a severe shortage of cash to keep going its armed forces and economy, after close to 48 months of full-scale conflict with Russia.

For Europe, the solution to plugging Ukraine's budget hole of €135.7bn for the next two years lies in Moscow's immobilized funds located within Belgian bank Euroclear, and Brussels aim to finalize the plan at their Brussels summit next week.

Authorities in Russia warn the EU plan would be an illegal seizure, and Russia's central bank stated on Friday it was suing Euroclear in a Moscow court prior to a definitive agreement is made.

'Appropriate' to Utilize Moscow's Funds, Argue Kyiv and Brussels

Overall, Russia has approximately €210bn of its assets frozen in the EU, and €185bn of that is held by Euroclear.

The EU and Ukraine contend that those funds should be used to reconstruct what Russia has devastated: The European Commission terms it a "loan for reparations" and has come up with a plan to support Ukraine's economy to the tune of €90bn.

"It is appropriate that Moscow's blocked funds should be used to rebuild what Russia has devastated – and that those funds then becomes Ukraine's," states Ukrainian President Volodymyr Zelensky.

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

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

Authorities in Brussels is concerned it will be left with an huge bill if it all backfires, and Euroclear head Valérie Urbain argues using the assets could "disrupt the world's financial order".

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

Belgium's PM Bart de Wever has set the EU a series of "logical, sensible, and warranted conditions" before he will agree to the reconstruction loan scheme, and he has not excluded legal action if it "poses significant risks" for his country.

Explaining the EU's Proposal?

European Union officials is racing against time prior to next Thursday's summit to come up with a solution that Belgium can accept.

Previously the EU has refrained from using the frozen capital directly but for the past year 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 Moscow's sovereign assets.

But global military support for Ukraine has declined sharply in 2025, and Europe has had trouble trying to cover the shortfall left by the US decision to largely cease funding Ukraine under President Donald Trump.

There are presently two EU proposals aimed at furnishing Ukraine with €90bn, to finance a large portion of its financial requirements.

• The first is to raise the money on the markets, guaranteed by the EU budget as a surety. This is Belgium's preferred option but it needs 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 Moscow's immobilized capital, which were at first held in financial instruments but have now mostly turned into cash. That capital is Euroclear property located within the European Central Bank.

The European Commission accepts Belgium has legitimate concerns and states it is confident it has dealt with them.

The plan is for Belgium to be safeguarded with a assurance applying to all the €210bn of Russian assets in the EU.

Should Euroclear suffer a loss 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 targeted Belgium itself, any ruling by a Russian court would not be accepted in the EU.

In a significant move, EU ambassadors are poised to endorse on Friday to immobilise Russia's central bank assets held in Europe for the foreseeable future.

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

The EU ambassadors are expected to use an extraordinary measure 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.

The Reasons Belgium is Not Yet Convinced

The Belgian government is insistent it remains a committed partner of Ukraine, but sees legal risks in the plan and is concerned about being left to handle the fallout if things do not work out.

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

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

Although the EU might be able to obtain enough guarantees for the loan itself, Belgium fears an further exposure of being vulnerable to extra damages or penalties.

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

"Lenders need to adhere to capital and liquidity requirements and shouldn't make one enormous loan. Now the EU is instructing Euroclear to do precisely that.

"Why do we have these financial regulations? It's because we want banks to be solvent. And if things turn sour it would become the responsibility of Belgium to save Euroclear. That's another reason why it's so crucial for Belgium to secure water-tight assurances for Euroclear."

Europe Facing Strain from All Sides

The situation is urgent, caution several EU member states including those bordering Russia such as the Baltics, Finland and Poland. They argue the scheme involving immobilized capital is "the most financially feasible and politically achievable solution".

"It's a matter of destiny for us," states 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 reach an agreement in a week's time".

Although Russia is unyielding its money should not be accessed, 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 indicated Ukraine is in discussions with Europe and the US on a rebuilding fund, but he is also mindful the US has been engaging with Russia about future co-operation.

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