Russia Retaliates at the EU's Scheme to Loan Immobilized Russian Funds to Kyiv

Kyiv remains depleting its funding to maintain its armed forces and economy, after nearly four years of the ongoing invasion by Moscow.

For Europe, the solution to addressing Ukraine's budget hole of €135.7bn for the coming 24 months rests with frozen Russian assets sitting in Belgian bank Euroclear, and EU leaders seek to finalize the plan at their meeting in Brussels next week.

Authorities in Russia caution the EU plan would be an act of theft, and the Central Bank of Russia declared on Friday it was taking to court Euroclear in a Moscow court ahead of a final decision is made.

'Just' to Use Russia's Assets, Argue European and Ukrainian Officials

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

European and Ukrainian authorities argue that that capital should be used to reconstruct what Russia has devastated: The European Commission calls it a "reconstruction loan" and has proposed a plan to prop up Ukraine's economy valued at €90bn.

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

German Chancellor Friedrich Merz says the assets will "help Ukraine to defend itself successfully against subsequent Russian attacks".

Moscow's lawsuit was anticipated in Brussels. But it is not just Moscow that is dissatisfied.

Belgium is concerned it will be saddled with an enormous bill if it all backfires, and Euroclear CEO Valérie Urbain says using the assets could "disrupt the global financial architecture".

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

The leader of Belgium Bart de Wever has given Brussels a series of "logical, sensible, and warranted conditions" before he will endorse the reconstruction loan scheme, and he has not excluded legal action if it "carries significant risks" for his country.

The Details of the EU's Plan?

The EU is working to the wire before next Thursday's summit to agree on a arrangement that Belgium can agree to.

So far the EU has held off touching the assets themselves directly but starting in 2024 has transferred the "extraordinary revenues" from them to Ukraine. In 2024 that amounted to €3.7bn. From a legal standpoint, using the revenue is seen as permissible as Russia is under sanction and the earnings are not Moscow's sovereign assets.

But international military aid for Ukraine has declined sharply in 2025, and Europe has struggled to make up the shortfall left by the US decision to all but stop funding Ukraine under President Donald Trump.

There are at the moment two EU proposals seeking to furnishing Ukraine with €90bn, to cover two-thirds of its financial requirements.

• The first is to raise the money on capital markets, backed by the EU budget as a guarantee. This is Belgium's preferred option but it requires a consensus by EU leaders and that would be difficult when Budapest and Bratislava are against funding Ukraine's military.
• This makes the other option loaning Ukraine cash from the Moscow's immobilized capital, which were initially held in financial instruments but have now predominantly turned into cash. That money is Euroclear property held in the European Central Bank.

Brussels' executive arm acknowledges Belgium has justified fears and says it is confident it has dealt with them.

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

If 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.

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

As an important step, EU ambassadors are poised to endorse on Friday to immobilise Russia's central bank assets held in Europe permanently.

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

The EU ambassadors are planning to use an extraordinary measure under Article 122 of the EU Treaties so the assets remain frozen as long as an "direct danger to the economic interests of the union" continues.

The Reasons Belgium is Still Not On Board

The Belgian government is firm it remains a committed partner of Ukraine, but perceives juridical dangers in the plan and is concerned about being shouldering the consequences if things go wrong.

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

"The Belgian economy is not large. Belgian GDP is about €565bn – imagine if it would need to bear a €185bn bill," notes Veerle Colaert, professor of financial law at KU Leuven University.

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

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

"Lenders need to follow stability regulations and shouldn't make one enormous loan. Now the EU is telling Euroclear to do precisely that.

"What is the purpose of these financial regulations? It's because we want banks to be stable. And if things turn sour it would fall to Belgium to rescue Euroclear. That's another reason why it's so important for Belgium to obtain absolute guarantees for Euroclear."

Europe In a Difficult Position from Multiple Fronts

Time is of the essence, state several EU member states including those closest to Russia such as the Baltics, Finland and Poland. They argue the proposal to use Russian funds is "the most economically realistic and practically possible solution".

"It is a decisive moment for us," says 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 finalize the deal in a week's time".

While Russia is insistent its money should not be accessed, there are additional apprehensions among leaders in Europe that the US may want to deploy Russia's frozen billions differently, as part of its own peace plan.

Zelensky has indicated Ukraine is in discussions with Europe and the US on a reconstruction fund, but he is also cognizant the US has been holding discussions with Russia about potential collaboration.

An initial document of the US peace plan referred to $100bn of Russia's frozen assets being used by the US for reconstruction, with the US {taking|receiving