Russia Retaliates at Europe's Scheme to Lend Frozen Russian Assets to Kyiv

Ukraine is depleting its cash to maintain its armed forces and economy afloat, after close to 48 months of the ongoing invasion by Moscow.

In the view of European leaders, the answer to plugging Ukraine's budget hole of €135.7bn for the coming 24 months rests with Moscow's immobilized funds held by Belgian bank Euroclear, and EU leaders seek to give it the green light at their meeting in Brussels next week.

Russian officials warn the EU plan would be an act of theft, and Russia's central bank declared on Friday it was initiating legal action against Euroclear in a Moscow court even before a final decision is made.

'Only Fair' to Utilize Russia's Assets, Argue Kyiv and Brussels

Overall, Russia has approximately €210bn of its assets 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 reconstruct what Russia has devastated: The European Commission refers to it as a "reconstruction loan" and has devised a plan to bolster Ukraine's economy to the tune of €90bn.

"It is only just that the assets frozen from Russia should be used to rebuild what Russia has devastated – and that money then becomes Ukraine's," remarks Ukrainian President Volodymyr Zelensky.

Germany's leader Friedrich Merz states the assets will "help Ukraine to protect itself successfully against future Russian attacks".

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

Belgium is anxious it will be saddled with an massive bill if it all backfires, and Euroclear head Valérie Urbain warns using the assets could "destabilise the international financial system".

Euroclear also has an estimated €16-17bn immobilised in Russia.

Belgium's PM Bart de Wever has given Brussels 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.

Explaining 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 agree to.

So far the EU has refrained from touching the assets themselves directly but since last year has transferred the "excess income" from them to Ukraine. In 2024 that totaled €3.7bn. Juridically, using the revenue is seen as safe as Russia is subject to sanctions and the returns are not property of the Russian state.

But international military aid for Ukraine has slipped dramatically in 2025, and Europe has struggled to compensate for the deficit left by the US decision to virtually halt funding Ukraine under President Donald Trump.

There are currently two EU plans aimed at providing Ukraine with €90bn, to finance a majority of its financial requirements.

• Option one is to raise the money on financial markets, guaranteed by the EU budget as a surety. This is Belgium's preferred option but it requires a unanimous vote by EU leaders and that would be difficult when two member states oppose funding Ukraine's military.
• That leaves lending Ukraine cash from the Moscow's immobilized capital, which were initially held in securities but have now mostly matured into cash. That money is Euroclear property deposited at the European Central Bank.

The European Commission recognizes Belgium has justified fears and states it is assured it has addressed them.

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

Should 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.

In the event that Russia went after 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 freeze indefinitely Russia's central bank assets held in Europe permanently.

Heretofore they have had to vote unanimously every six months to extend 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 continue to be immobilized as long as an "clear risk to the economic interests of the union" continues.

The Reasons Belgium is Still Not Convinced

Brussels is insistent it remains a strong supporter of Ukraine, but sees regulatory pitfalls in the plan and worries about being shouldering the fallout if things fail.

A typically partisan political environment in this case has come together in support of Prime Minister Bart de Wever, who is being pressured from fellow EU leaders.

"Belgium has a modest-sized economy. Belgian GDP is about €565bn – think about if it would need to shoulder a €185bn bill," notes Veerle Colaert, expert in financial law at KU Leuven University.

While the EU might be able to obtain sufficient guarantees for the loan itself, Belgium worries about an added risk of being subject to extra damages or penalties.

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

"Financial institutions need to follow capital and liquidity requirements and shouldn't concentrate risk. Now the EU is telling Euroclear to do exactly that.

"Why do we have these banking laws? It's because we want banks to be solvent. And if things fail it would be up to Belgium to rescue Euroclear. That's another reason why it's so important for Belgium to get water-tight assurances for Euroclear."

Europe In a Difficult Position from Every Direction

The situation is urgent, caution several EU member states including those closest to Russia such as the Baltics, Finland and Poland. They believe the frozen assets plan is "a financially feasible and politically achievable solution".

"It's a matter of destiny for us," warns leading German conservative MP Norbert Röttgen. "If we fail, I don't know what we'll do next. That's why we have to succeed 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 blocked funds in another way, as part of its own peace plan.

Zelensky has said Ukraine is coordinating with Europe and the US on a rebuilding fund, but he is also aware the US has been talking to Russia about possible partnership.

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