Russia Retaliates at the EU's Scheme to Lend Immobilized Moscow's Cash to Kyiv

Ukraine is facing a severe shortage of financial resources to keep going its military and economy, after almost four years of the ongoing invasion by Moscow.

For Europe, the solution to addressing Kyiv's financial shortfall of €135.7bn for the coming 24 months rests with assets belonging to Russia that are frozen sitting in Belgian bank Euroclear, and European Union officials aim 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 the Central Bank of Russia announced on Friday it was initiating legal action against Euroclear in a Moscow court even before a conclusive plan is made.

'Appropriate' to Utilize Russia's Assets, Argue Kyiv and Brussels

In total, 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 restore what Russia has laid waste to: The European Commission calls it a "reconstruction loan" and has devised a plan to support Ukraine's economy valued at €90bn.

"It is appropriate that Moscow's blocked funds should be used to rebuild what Russia has devastated – and that those funds then becomes ours," states Ukrainian President Volodymyr Zelensky.

Chancellor Friedrich Merz says the assets will "enable Ukraine to shield itself successfully against any future Russian attacks".

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

The Belgian government is anxious it will be saddled with an enormous bill if it all backfires, and Euroclear head Valérie Urbain says using the assets could "disrupt the world's financial order".

Euroclear also has an estimated €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 accept the reparations plan, and he has refused to rule out legal action if it "presents significant risks" for his country.

The Details of the EU's Strategy?

The EU is working to the wire before next Thursday's summit to finalize a compromise that Belgium can support.

So far the EU has refrained from touching the frozen capital directly but for the past year has directed the "extraordinary revenues" from them to Ukraine. In 2024 that totaled €3.7bn. Legally, using the interest is considered less risky as Russia is under sanction and the returns are not property of the Russian state.

But foreign defense assistance for Ukraine has slipped dramatically in 2025, and Europe has had trouble trying to cover the shortfall resulting from the US decision to virtually halt funding Ukraine under President Donald Trump.

There are currently two EU plans seeking to supplying Ukraine with €90bn, to finance two-thirds of its financial requirements.

• One is to raise the money on the markets, backed by the EU budget as a surety. This is Belgium's first choice but it needs a unanimous vote by EU leaders and that would be problematic when Hungary and Slovakia oppose funding Ukraine's military.
• That leaves lending Ukraine cash from the Moscow's immobilized capital, which were at first held in financial instruments but have now predominantly been converted into cash. That funding is an asset of Euroclear held in the European Central Bank.

Brussels' executive arm acknowledges Belgium has justified fears and says it is convinced it has resolved them.

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

If Euroclear face a financial hit 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 went after Belgium itself, any judgment by a Russian court would not be enforced in the EU.

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

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

The EU ambassadors are planning to use an special provision under Article 122 of the EU Treaties so the assets remain frozen as long as an "immediate threat to the economic interests of the union" continues.

Why Belgium is Remains On Board

Belgium is insistent it remains a strong supporter of Ukraine, but identifies juridical dangers in the plan and worries about being left to handle the consequences if things do not work out.

A normally divided political landscape in this case has united behind Prime Minister Bart de Wever, who is under pressure from fellow EU leaders.

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

Although the EU might be able to arrange adequate guarantees for the loan itself, Belgium is concerned about an further exposure of being vulnerable to extra fines or liabilities.

Prof Colaert also believes the stipulation for Euroclear to issue credit to the EU would contravene EU banking regulations.

"Banks need to comply with capital and liquidity requirements and shouldn't make one enormous loan. Now the EU is asking Euroclear to do just that.

"Why do we have these bank rules? It's because we want banks to be solvent. And if things turn sour it would fall to Belgium to save Euroclear. That's a further cause why it's so crucial for Belgium to obtain water-tight protections for Euroclear."

The European Union In a Difficult Position from All Sides

The situation is urgent, caution seven EU member states including those closest to Russia such as the Baltics, Finland and Poland. They maintain the proposal to use Russian funds is "the most fiscally viable 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 subsequently. That's why we have to finalize the deal in a week's time".

While Russia is insistent its money should not be used, there are additional apprehensions among European figures that the US may want to use Russia's frozen billions differently, 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 holding discussions with Russia about possible partnership.

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