Moscow Retaliates at the EU's Plan to Lend Frozen Russian Assets to Ukraine

Ukraine is facing a severe shortage of funding to maintain its military and economy afloat, after close to 48 months of Russia's full-scale war.

From the EU's perspective, the remedy to plugging Ukraine's funding gap of €135.7bn for the following biennium rests with frozen Russian assets held by Belgian bank Euroclear, and EU leaders seek to finalize the plan at their meeting in Brussels next week.

Russian officials 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.

'Appropriate' to Use Moscow's Assets, Argue European and Ukrainian Officials

All told, Russia has about €210bn of its state reserves immobilized in the EU, and €185bn of that is held by Euroclear.

The EU and Ukraine argue that that capital should be used to restore what Russia has laid waste to: The European Commission calls it a "reparations loan" and has come up with a plan to prop up Ukraine's economy to the tune of €90bn.

"It is appropriate that Moscow's blocked funds should be used to reconstruct what Russia has devastated – 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 shield itself efficiently against subsequent Russian attacks".

The legal move by Moscow was expected in Brussels. But it is not just Moscow that is concerned.

The Belgian government is anxious it will be saddled with an huge bill if it all goes wrong, and Euroclear head Valérie Urbain warns using the assets could "undermine the international financial system".

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

Belgium's PM Bart de Wever has presented the EU with 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 "presents significant risks" for his country.

The Details of the EU's Plan?

Brussels is working to the wire ahead of next Thursday's summit to come up with a solution that Belgium can accept.

So far the EU has held off accessing the principal funds directly but for the past year has directed the "extraordinary revenues" from them to Ukraine. In 2024 that amounted to €3.7bn. Juridically, using the profits is considered permissible as Russia is sanctioned and the proceeds are not Russian sovereign property.

But global military support for Ukraine has fallen significantly in 2025, and Europe has found it difficult to compensate for the deficit caused by the US decision to largely cease funding Ukraine under President Donald Trump.

There are presently two EU options designed to supplying Ukraine with €90bn, to cover a majority of its funding needs.

• The first is to raise the money on capital markets, backed by the EU budget as a surety. This is Belgium's preferred option but it demands a agreement by all by EU leaders and that would be challenging when Budapest and Bratislava oppose funding Ukraine's military.
• This makes the other option loaning Ukraine cash from the Moscow's immobilized capital, which were at first held in financial instruments but have now predominantly matured into cash. That funding is an asset of Euroclear held in the European Central Bank.

The EU's executive accepts Belgium has justified fears and claims it is convinced it has dealt with them.

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

Should Euroclear incur losses of its own assets in Russia, the loss would be compensated from assets belonging to Russia's own clearing house which are in the EU.

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

As an important step, EU ambassadors are set to approve on Friday to permanently block Russia's central bank assets held in Europe for the foreseeable future.

Until now they have had to vote all together every six months to continue 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 "clear risk to the economic interests of the union" continues.

Why Belgium is Remains On Board

Brussels is adamant it remains a staunch ally of Ukraine, but identifies legal risks in the plan and is concerned about being forced to deal with the repercussions if things fail.

A typically 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 around €565bn – consider if it would need to shoulder a €185bn bill," notes Veerle Colaert, expert in financial law at KU Leuven University.

Although the EU might be able to arrange sufficient assurances for the loan itself, Belgium is concerned about an additional danger of being exposed to extra damages or penalties.

Prof Colaert also believes the requirement for Euroclear to provide a loan to the EU would contravene EU banking regulations.

"Lenders need to comply with stability regulations and shouldn't concentrate risk. Now the EU is instructing Euroclear to do exactly 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 fall to Belgium to save Euroclear. That's an additional reason why it's so vital for Belgium to get ironclad guarantees for Euroclear."

EU Leaders Under Pressure from All Sides

There is no time to lose, caution seven EU member states including those closest to Russia such as the Baltics, Finland and Poland. They maintain the scheme involving immobilized capital is "the financially feasible and politically realistic solution".

"This is a crucial test 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 unyielding its money should not be used, there are additional apprehensions among EU officials that the US may want to employ Russia's blocked funds in another way, as part of its own diplomatic proposal.

Zelensky has stated Ukraine is coordinating with Europe and the US on a reconstruction fund, but he is also mindful the US has been holding discussions with Russia about possible partnership.

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