Russia Responds at the EU's Proposal to Lend Frozen Moscow's Cash to Ukraine

Ukraine is facing a severe shortage of cash to sustain its military and economy afloat, after nearly four years of full-scale conflict with Russia.

For Europe, the remedy to plugging Ukraine's budget hole of €135.7bn for the coming 24 months is found in Moscow's immobilized funds located within Belgian bank Euroclear, and EU leaders hope to sign that off at their meeting in Brussels next week.

Moscow's representatives caution the EU plan would be an act of theft, and the Central Bank of Russia announced on Friday it was initiating legal action against Euroclear in a Moscow court ahead of a final decision is made.

'Just' to Utilize Moscow's Funds, Assert European and Ukrainian Officials

Overall, Russia has about €210bn of its state reserves immobilized in the EU, and €185bn of that is in the custody of Euroclear.

European and Ukrainian authorities maintain that those funds should be used to rebuild what Russia has destroyed: Brussels terms it a "reconstruction loan" and has proposed a plan to bolster Ukraine's economy amounting to €90bn.

"It's only fair that Moscow's blocked funds should be used to reconstruct what Russia has devastated – and that those funds then becomes ours," remarks Ukraine's Volodymyr Zelensky.

Germany's leader Friedrich Merz says the assets will "allow Ukraine to protect itself effectively against subsequent Russian attacks".

Russia's court action was expected in Brussels. But it is not only Moscow that is dissatisfied.

Authorities in Brussels is anxious it will be burdened by an huge bill if it all fails, and Euroclear head Valérie Urbain warns using the assets could "undermine 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 "rational, reasonable, and justified conditions" before he will agree to the reparations plan, and he has left open the possibility of legal action if it "carries significant risks" for his country.

What is the EU's Plan?

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

Until now the EU has refrained from touching the principal funds directly but starting in 2024 has directed the "windfall profits" from them to Ukraine. In 2024 that was €3.7bn. Juridically, using the revenue is considered permissible as Russia is sanctioned 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 gap left by the US decision to all but stop funding Ukraine under President Donald Trump.

There are at the moment two EU options seeking to supplying Ukraine with €90bn, to pay for a large portion of its budgetary necessities.

• The first is to raise the money on financial markets, backed by the EU budget as a surety. This is Belgium's preferred option but it demands a consensus by EU leaders and that would be problematic when two member states are against funding Ukraine's military.
• The alternative is loaning Ukraine cash from the Moscow's immobilized capital, which were at first held in securities but have now predominantly turned into cash. That capital is owned by Euroclear located within the European Central Bank.

The EU's executive acknowledges Belgium has legitimate concerns and states it is assured it has dealt with them.

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

Should Euroclear incur losses of its own assets in Russia, the shortfall would be covered from assets belonging to Russia's own settlement agency which are in the EU.

If Russia targeted Belgium itself, any judgment by a Russian court would not be recognized in the EU.

In a significant move, EU ambassadors are expected to agree on Friday to immobilise Russia's central bank assets held in Europe permanently.

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

The EU ambassadors are expected to use an special provision under Article 122 of the EU Treaties so the assets continue to be immobilized as long as an "direct danger to the economic interests of the union" continues.

Why Belgium is Remains Satisfied

Brussels is firm it remains a committed partner of Ukraine, but perceives legal risks in the plan and is concerned about being shouldering the consequences if things go wrong.

A normally fractured political scene in this case has united behind Prime Minister Bart de Wever, who is facing pressure from fellow EU leaders.

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

Although the EU might be able to obtain sufficient protections for the loan itself, Belgium worries about an additional danger of being vulnerable to extra legal costs.

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

"Financial institutions need to adhere to prudential rules and shouldn't put all their eggs in one basket. Now the EU is telling Euroclear to do precisely that.

"What is the purpose of these bank rules? It's because we want banks to be secure. And if things go wrong it would become the responsibility of Belgium to bail out Euroclear. That's a further cause why it's so vital for Belgium to secure water-tight assurances for Euroclear."

Europe Under Pressure from Multiple Fronts

There is no time to lose, state a group of EU member states including those closest to Russia such as the Baltics, Finland and Poland. They believe the scheme involving immobilized capital is "a financially feasible and politically realistic 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 next. That's why we have to reach an agreement in a week's time".

While Russia is insistent its money should not be used, there are added concerns among leaders in Europe that the US may want to deploy Russia's frozen billions in another way, as part of its own diplomatic proposal.

Zelensky has stated 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 possible partnership.

A preliminary version of the US peace plan suggested $100bn of Russia's frozen assets being used by the US for reconstruction, with the US {taking|receiving