Russia Responds at Europe's Proposal to Lend Frozen Moscow's Funds to Kyiv

Ukraine is facing a severe shortage of financial resources to maintain its armed forces and economy afloat, after almost four years of Russia's full-scale war.

For Europe, the answer to addressing Ukraine's funding gap of €135.7bn for the coming 24 months rests with assets belonging to Russia that are frozen held by Belgian bank Euroclear, and Brussels seek to sign that off at their Brussels summit next week.

Russian officials warn the EU plan would be an act of theft, and Russia's central bank stated on Friday it was taking to court Euroclear in a Moscow court ahead of a conclusive plan is made.

'Appropriate' to Employ Russia's Funds, Say Kyiv and Brussels

Overall, Russia has roughly €210bn of its funds blocked in the EU, and €185bn of that is in the custody of Euroclear.

Brussels and Kyiv contend that those funds should be used to reconstruct what Russia has destroyed: Brussels refers to it as a "reconstruction loan" and has proposed a plan to bolster Ukraine's economy to the tune of €90bn.

"It is appropriate 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.

Chancellor Friedrich Merz states the assets will "allow Ukraine to shield itself effectively against future Russian attacks".

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

Authorities in Brussels is worried it will be left with an massive bill if it all fails, and Euroclear chief executive Valérie Urbain warns using the assets could "disrupt the global financial architecture".

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

Belgian Prime Minister Bart de Wever has presented the EU with a series of "logical, sensible, and warranted conditions" before he will agree to the reconstruction loan scheme, and he has refused to rule out legal action if it "carries significant risks" for his country.

The Details of the EU's Strategy?

Brussels is racing against time ahead of next Thursday's summit to come up with a compromise that Belgium can agree to.

So far the EU has avoided using the principal funds directly but for the past year has paid the "excess income" from them to Ukraine. In 2024 that was €3.7bn. From a legal standpoint, using the revenue is deemed safe as Russia is sanctioned and the earnings are not property of the Russian state.

But international military aid for Ukraine has fallen significantly in 2025, and Europe has struggled to compensate for the gap resulting from the US decision to all but stop funding Ukraine under President Donald Trump.

There are currently two EU proposals designed to furnishing Ukraine with €90bn, to finance a majority of its financial requirements.

• The first is to secure the capital on the markets, backed by the EU budget as a guarantee. This is Belgium's favored solution but it demands a unanimous vote by EU leaders and that would be difficult when Hungary and Slovakia oppose funding Ukraine's military.
• This makes the other option loaning Ukraine cash from the frozen Russian funds, which were originally held in financial instruments but have now mostly turned into cash. That capital is an asset of Euroclear deposited at the European Central Bank.

The EU's executive acknowledges Belgium has valid worries and says it is convinced it has addressed them.

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

If Euroclear suffer a loss of its own assets in Russia, that would be offset from assets belonging to Russia's own clearing house which are in the EU.

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

In a key development, EU ambassadors are poised to endorse on Friday to immobilise Russia's central bank assets held in Europe indefinitely.

Heretofore they have had to vote all together every six months to extend the freeze, which could have meant a repeated risk to Belgium.

The EU ambassadors are set to use an emergency clause under Article 122 of the EU Treaties so the assets stay blocked as long as an "clear risk to the economic security of the union" continues.

Why Belgium is Remains Satisfied

Brussels is adamant it remains a committed partner of Ukraine, but identifies legal risks in the plan and fears being shouldering the fallout if things go wrong.

A normally fractured political scene in this case has rallied behind Prime Minister Bart de Wever, who is being pressured from European colleagues.

"Belgium has a modest-sized economy. Belgian GDP is approximately €565bn – consider if it would need to carry a €185bn bill," says Veerle Colaert, professor of financial law at KU Leuven University.

Although the EU might be able to obtain adequate assurances for the loan itself, Belgium worries about an added risk of being vulnerable to extra damages or penalties.

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

"Financial institutions need to comply with prudential rules and shouldn't concentrate risk. 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 be up to Belgium to bail out Euroclear. That's a further cause why it's so vital for Belgium to secure absolute protections for Euroclear."

The European Union Facing Strain from Every Direction

The situation is urgent, state seven EU member states including those closest to Russia such as the Baltics, Finland and Poland. They argue the scheme involving immobilized capital is "the most financially feasible and politically realistic solution".

"It's a matter of destiny for us," says leading German conservative MP Norbert Röttgen. "Should we not succeed, 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 adamant its money should not be accessed, there are additional apprehensions among EU officials that the US may want to deploy Russia's immobilized billions for another purpose, as part of its own peace initiative.

Zelensky has indicated Ukraine is working with Europe and the US on a reconstruction fund, but he is also mindful the US has been holding discussions with Russia about future co-operation.

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